HHS Proposes Benchmark Approach for Essential Health Benefits under the ACA | Practical Law

HHS Proposes Benchmark Approach for Essential Health Benefits under the ACA | Practical Law

On December 16, 2011, the Department of Health and Human Services (HHS) issued a bulletin addressing the agency's approach to defining essential health benefits, which small group and individual health plans will be required to provide under the Affordable Care Act (ACA). HHS proposes that essential health benefits be defined using a benchmark approach.

HHS Proposes Benchmark Approach for Essential Health Benefits under the ACA

Practical Law Legal Update 9-516-9287 (Approx. 4 pages)

HHS Proposes Benchmark Approach for Essential Health Benefits under the ACA

by PLC Employee Benefits & Executive Compensation
Published on 19 Dec 2011 • USA (National/Federal)
On December 16, 2011, the Department of Health and Human Services (HHS) issued a bulletin addressing the agency's approach to defining essential health benefits, which small group and individual health plans will be required to provide under the Affordable Care Act (ACA). HHS proposes that essential health benefits be defined using a benchmark approach.
On December 16, 2011, HHS issued an information bulletin outlining its proposed approach for defining essential health benefits (EHBs), which must be provided:
  • By small group and individual health insurance plans.
  • Both inside and outside of the insurance exchanges required by the Affordable Care Act (ACA).
The bulletin:
The ACA requires health plans offered in the small group and individual markets, both inside and outside the insurance exchanges, to offer a comprehensive package of items and services. These items and services, referred to as EHBs, must include at least the following ten statutory categories:
  • Ambulatory patient services.
  • Emergency services.
  • Hospitalization.
  • 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.
  • Pediatric services, including oral and vision care.
Under the HHS proposal:
  • EHBs are defined using a "benchmark" approach.
  • States have the flexibility to select a benchmark plan that reflects the scope of services offered by a typical employer plan.
Under the benchmark approach, states may choose one of the following benchmark health plans (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 health maintenance organization (HMO) plan offered in the state's commercial market by enrollment.
States that do not select a benchmark will be given a default benchmark that is the small group plan with the largest enrollment in the state.
Under the proposed approach:
  • Plans may modify coverage within a benefit category as long as they:
    • continue to offer coverage for all ten statutory categories; and
    • do not reduce the value of coverage.
  • Transition relief available for 2014 and 2015 provides that if a state chooses a benchmark plan that includes state-required benefits in excess of EHBs, that benchmark would include the state mandates in the state's EHB package. Generally, however, the ACA requires states to cover the cost of benefits required in excess of EHBs for individuals enrolled in any plan offered through an exchange.
The HHS bulletin requires health plans to offer benefits that are:
  • "Substantially equal" to the benchmark plan selected by the state.
  • Modified as necessary to reflect the ten coverage categories.
HHS acknowledges in the bulletin that one drawback to its benchmark approach is that not every benchmark plan includes coverage of all ten statutory categories. For example, certain benchmark plans do not routinely cover:
  • Habilitative services.
  • Pediatric oral or vision services.
HHS therefore intends to propose that if a benchmark is missing certain categories of benefits, it must supplement the benefits from any other benchmark option. In addition, the bulletin emphasizes that mental health and substance use disorder benefits are:
  • One of the ten required coverage categories.
  • An EHB in both the small group and individual markets.
As a result, HHS will propose that parity for mental health and substance use disorder benefits applies in the context of EHBs. This generally means, as required under the Mental Health Parity and Addiction Equity Act (MHPAEA), that financial requirements or treatment limits for mental health and substance use disorder benefits be no more restrictive than those for medical and surgical benefits.
Finally, the HHS bulletin proposes that:
  • Benchmarks will be updated in the future.
  • State mandates outside the definition of EHBs may not be included in future years.

Practical Implications

The bulletin does not indicate when in 2012 HHS' more formal guidance regarding EHBs can be expected. Comments regarding the bulletin itself must be sent to HHS by January 31, 2012. Under the ACA, HHS must make an assessment by January 2013 as to whether the states will have operational exchanges by January 1, 2014. In addition to offering flexibility to states in setting up their exchanges, the bulletin offers additional hints of how HHS will define EHBs. For example, HHS intends to propose that EHBs will not include non-medically necessary orthodontic benefits. The task of defining habilitative services, however, may prove more challenging, given that the scope of these services is less clear and they are often not identified as a distinct group of services.
For analysis of the ACA, see Affordable Care Act (ACA) Toolkit.