Kavita Patel
Posted 12/28/11 on the Health Affairs Blog
©2011 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.
In the recently released bulletin from HHS on the essential health benefits (EHB), the administration answered a major question on the minds of many critical healthcare stakeholders: Will the administration be specific in their guidance and create a definition of what constitutes “essential?” The answer, is no, they will leave the bulk of the decision-making to the states, thus increasing the likelihood of variation in benefits and access to elements of care.
Details of the bulletin were reviewed in an earlier Health Affairs Blog post, but this post will review the implications of the guidance for various healthcare stakeholders and will note areas that will likely require further guidance from the administration.
First, a brief review in Table 1 below (click to view) of populations affected by the EHB Bulletin, from the perspective of the insurance markets in which the populations would be purchasing health insurance:
(The Basic Health Plan, as defined by the Affordable Care Act, allows for federal subsidies to states at the equivalent of 95 percent of what the federal government would have spent on tax credits and subsidies for out- of-pocket costs for adults with income between 133 and 200 percent of the federal poverty level (FPL) and legal resident immigrants with incomes below 133 percent FPL whose immigration status disqualifies them from federally matched Medicaid.)
Basic Benefit Package Design (From Cost Perspective) Of Benchmark Plans
Next a review of the various out of pocket costs for the types of “benchmark plans” from which states must choose to structure their EHB, and a description of the typical benefit package based partly on a 2009 study from the Congressional Research Service and the author’s analysis of state plan websites and FEHBP information. (The description in the text does not include out-of-pocket cost-sharing limits because the discussion focuses on the initial deterrent effect of cost-sharing on utilization of care, not on the cumulative financial burden of cost-sharing.) While this may not seem to have a direct effect on the EHB discussion, it is an illustration of how benefits are often structured into a financing mechanism which can incentivize the utilization of various benefits more than others.
This is best seen in the prescription drug copay/tiered benefit mechanism. As private insurance companies and states think through the implementation issues of the EHB, they will largely look to align these benefits within financing mechanisms such as copays/coinsurance and tiered incentives. The ACA provides for consumer protections such as out-of-pocket maximums, etc., but there are still variations in the structure which can allow for various incentives to be applied, adding to the potential for costs to be shifted to consumers. And as many have been concerned with, the variation in cost-sharing for covered services can be very important in terms of effects on health care spending overall.
The Institute of Medicine panel that made EHB recommendations made strong statements regarding affordability of the EHB. This was not an element discussed in the bulletin, but it is definitely one that will be a consideration for states. The cost of the various benchmark plans is not readily available at a national level, but variability in cost-sharing could grow if a state were to choose a benchmark plan that is more expensive than others.
Small Group Insurance Products in State’s Small Group Market:
- $750-1500 annual deductible.
- $30 copays for office visits.
- 20% coinsurance for hospital
- 20% coinsurance for lab and x-ray.
- Tiered copay for prescriptions ($10 for generic, $25 for brand-name drugs on the plan’s formulary, $50 for brand-name drugs not on the formulary)
State Employee Health Benefit Plan (Colorado State Plan)
- $1500 annual deductible.
- $30 copays for office visits.
- 20% coinsurance for inpatient stay
- 20% coinsurance for lab and x-ray.
- Tiered copay for prescriptions ($10 for generic, $25 for brand-name drugs on the plan’s formulary, $50 for brand-name drugs not on the formulary)
Federal Employee Health Benefit Plan
- $350 annual deductible.
- $15 copays for office visits.
- $100 inpatient hospitalization copay plus 15% coinsurance
- 15% coinsurance for lab and x-ray.
- 15% coinsurance for generic prescription drugs, higher for non-generics
Commercial Non-Medicaid HMO in State
- No deductible
- $20 copays for office visits.
- $250 inpatient hospitalization copay
- No cost-sharing for lab or x-ray
- Three tiers of copayments for prescription drugs ($10 for generic, $25 for brand-name drugs on the plan’s formulary, $50 for brand-name drugs not on the formulary)
Analysis of Benefit Design Variation in Benchmark Plans
In a recent research brief from the office of the HHS Assistant Secretary for Planning and Evaluation(ASPE), staff researchers highlighted the similarities between the various benchmark plans. They found that overall, small group products and state and federal employee plans cover similar services, but they also noted that there is a great deal of variation across and within markets for certain services:
- Preventive and basic dental care
- Bariatric surgery
- Hearing aids
- In Vitro fertilization (not covered by FEHBP BCBS Standard and Basic Option plans, not subject to state mandates)
- Applied behavior analysis therapy for autism (not covered by FEHBP BCBS Standard and Basic Option plans, not subject to state mandates)
They also found that small group products and state plans can be limited in terms of broader categories of care considered “essential,” such as behavioral health treatment, habilitative services, and routine pediatric oral/vision care.
A note of caution There have been many studies of various benefit packages and differences between state employee plans, etc. However, there are some methodological limitations in making straight comparisons between states, since there is no uniform reporting standard; hence, actuarial value becomes the basis for comparison in general.
Implications for Various Stakeholders
Implications for States. States already have a great deal of pressure in terms of ACA implementation. The EHB bulletin has given some relief for states concerned with requirements above and beyond existing state laws, but it gives less relief for states with numerous mandates that had hoped the EHB would set a floor below those mandates. In addition, both ASPE researchers as well private sector surveys have found a great deal of variation around benefits in behavioral health, habilitative services (many states do not even have a standard definition of “habilitative”), and pediatric oral and vision services.
In areas in which the state chooses a benchmark that does not have one of the ten required components, such as habilitative services, the HHS bulletin states that the state may need to supplement the benchmark plan to cover the missing category. (Further guidance will likely be necessary in this area especially considering additional cost above and beyond the EHB will need to be absorbed by states in 2016.) States are also dealing with potential additional legislative mandates in their 2012 legislative sessions, which could add more complexity to this picture. Needless to say 2014 and 2015 will be transition years in which states will have to work closely with HHS to ensure smooth coverage, access and equity across the EHB, exchanges and Medicaid.
Implications for Insurers. Insurers are likely relieved to see a great deal of flexibility in terms of what is considered “essential.” However, a lack of a uniform standard might have implications for whether or not insurers will decide to offer product in regions, such as rural areas, with narrow networks of providers and limited potential benchmarks in the form of non-medicaid commercial HMO offerings.
Implications for Consumers. Consumers have expressed what can best be described as cautious support for the bulletin. If a state chooses the FEHBP 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. However, in states that do not choose FEHBP as the benchmark and have few mandates in the EHB areas, there might be a risk for less coverage of benefits and very little progress in forging a path for increased benefits for certain conditions. In particular, the lack of consistency across behavioral health, pediatric oral/vision and habilitative services is concerning and could require more attention from consumers and policymakers.
Finally, consumer/family education will be imperative. As demonstrated in previous research, simply designing a benefit package alone will not accomplish much unless paired with aggressive education around options and decision-making.
Kavita Patel, MD is a Fellow and Managing Director of Delivery System Reform and Clinical Transformation at the Engelberg Center for Health Care Reform at the Brookings Institution.
Care And Cost 