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All Eyes Turn to Essential Health Benefits Package as the Next Big Thing

By Jane Norman, CQ HealthBeat Associate Editor

August 3, 2011 -- An actuarial analysis of a model insurance policy under the health care law found that even people who qualify for subsidies may have a tough time affording insurance if they have a chronic condition.

The analysis released Wednesday by Avalere Health and the National Health Council, which advocates for chronically sick people, estimated what premiums and out-of-pocket charges would be for a model plan similar to one offered to federal employees by Blue Cross Blue Shield. They assumed that such a plan’s benefits would come close to whatever federal officials set as the health benefits package under the law.

The estimated annual premium would be $5,000 for an individual and nearly $12,500 for a family. Its actuarial value would be near the “platinum” level established in the law—one of the most generous plans.

Out-of-pocket spending for people with chronic illnesses like AIDS, Alzheimer’s, or kidney disease often can run into the thousands annually. “For people with limited income and resources, even if they qualify for exchange subsidies, the cost of enrolling in a qualified health plan may be higher than they can afford,” said the report.

The study came as stakeholders are eagerly awaiting the next big step in implementation of the health care law—the Obama administration’s proposed definition of an essential health benefits package. That decision is expected sometime late this year or early in 2012, after the Institute of Medicine makes its recommendations, probably in September.

In the meantime, advocates of all types are offering input to the Department of Health and Human Services on how the benefits design should be structured and what it should—or should not—include. It’s not known how specific HHS will be in defining an “essential” benefit. Some experts, including National Health Council members, warn that being too specific may drive up the costs of insurance policies. It’s also unclear how much will be left up to states in defining benefits in their exchanges.

The overhaul law (PL 111-148, PL 111-152) creates 10 categories of essential benefits that must be covered by 2014, including ambulatory patient services, emergency services, hospital visits, prescription drugs and lab services. Out-of-pocket costs and deductibles are limited.

One scenario in the report outlined the costs for a family of four, with one person with kidney disease, and with an income at 250 percent of the federal poverty level, which would qualify them for subsidies. With an income of $55,875, after the costs of median necessities like taxes, child care and food are subtracted, as well as health insurance premiums and out-of-pocket costs, just $485 a month would be left in the family budget.

That scenario was projected for an area of the country with an average cost of living. “For people with limited income and high-cost health needs requiring significant out-of-pocket spending, health insurance coverage may still not be affordable, even with subsidies,” the analysis said.

The results of the analysis also showed that consumers may face a lot of differences among plans when it comes to cost sharing. They said people will have to study policies closely to figure out what works best for their own health care consumption patterns. For example, the analysis said, someone with a chronic illness might want to sign up for a plan with lower out-of-pocket limits, even if the deductible is higher than in other plans.

The council also offered a series of general recommendations on how the essential benefits package should be set up, including:

  • Cost and quality should be balanced and patients protected. Plans should be required to disclose the deductible, co-payment and co-insurance amounts for in-network and out-of-network services. There should be oversight of states to ensure they are reviewing the design of plans. Patients should be able to expect cooperation and coordination when they switch plans or go in or out of Medicaid. 
  • The regulations should require care coordination and management practices by companies to improve the quality of care and reduce costs. There should be specific requirements for state navigator programs to help consumers figure out their best options, how to enroll and how to obtain their benefits. 
  • Clear standards should be set for “medical necessity” determinations by plans and it should be clear how people can appeal those decisions. Without adequate protection, people who are chronically ill will find it difficult to obtain coverage or challenge insurer decisions, the analysis said.

Marc Boutin, executive vice president and chief operating officer of the council, said the group is focusing on HHS and pushing the agency to ensure that the proposed benefits regulation offers people with chronic illnesses the protection that they need and at a price they can afford. Without that, “we could potentially create a whole new class that can’t afford care” and defeat the entire purpose of the law, he said.

National Health Council report

Jane Norman can be reached at [email protected].  

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