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Fight Looms over Government's Role in Setting Health Benefits

By Rebecca Adams, CQ HealthBeat

January 10, 2011 -- One of the biggest—and until now, among the most overlooked—fights over the implementation of the health care law starts in earnest this week as policymakers begin to determine which benefits insurers will have to cover beginning in 2014.

The health care law (PL 111-148, PL 111-152) requires the Department of Health and Human Services (HHS) to decide which medical services and equipment are "essential health benefits" that every insurer will have to cover. Drug and device manufacturers, physicians and other providers, patients, and others are watching closely to see how HHS officials settle questions such as whether the government will spell out every treatment that insurers must cover or write the rules more broadly.

The discussion will kick off at the Institute of Medicine, an arm of the National Academy of Sciences, which will have one closed-door meeting followed by a two-day public briefing that already has a waiting list of people wanting to attend. The institute is charged with producing recommendations for HHS, which it is expected to issue in September. IOM officials will hold several additional meetings, with the next round expected in March. The institute's report will not spell out which specific services should be covered but will advise HHS officials on policy principles and criteria to consider.

As a practical matter, many policy makers believe HHS officials will issue a proposed rule on essential health benefits by the end of the year so that insurance plans will have time to change benefits as needed before the provisions take effect in 2014.

The Federal Role

The discussion goes to the core of disagreements over how much influence the federal government should have over coverage in the United States. The implications are huge for companies whose products could be excluded or patients whose care will depend on what insurers will reimburse.

Critics such as tea party followers have complained that the new law amounts to a federal takeover of health care. Their complaints are based in part on this provision and also on related ones that dictate such things as amounts of deductibles and copays.

"The definition of essential health benefits will have a huge impact on providers of medical products and services," said Ian D. Spatz, senior adviser to Manatt Health Solutions. "In many cases, it will determine whether their products or services are paid for or not. This is the sleeper issue of health reform."

One key question is whether HHS officials will be prescriptive in detailing which treatments should be covered, or will give insurers more flexibility. The law specifies general categories that insurers must cover—such as outpatient and inpatient care, emergency services, pediatric dental and vision care, wellness services, rehab therapy and mental health care.

Beyond those broad categories, the HHS secretary is required to ensure that the scope of essential health benefits "is equal to the scope of benefits provided under a typical employer plan, as determined by the Secretary." HHS officials will rely in part on a survey that the Labor Department will conduct of employer plans.

Under some federal programs, such as the Medicare part D prescription drug programs, insurers are free to design benefit plans differently as long as they provide a certain value of overall coverage. But when it comes to the minimum benefit package, the law does not give insurers as much leeway.

But it is unclear whether HHS officials will seek to provide a specific list of treatments or take a broader approach, such as asking insurers to mirror benefits in particular plans, such as the most popular insurance policies in a state or in the Federal Employee Health Benefits Program. If HHS leaders take the more general route of tying the new standards to existing insurance plans, then they will have to fine-tune that because the law does not allow some current practices, such as charging patients higher rates if they are older, are terminally ill or have disabilities.

The language that protects against the higher rates contains a clause that some attorneys find curious. The provision says that HHS officials shall "not make coverage decisions, determine reimbursement rates, establish incentive programs, or design benefits in ways that discriminate against individuals because of their age, disability or expected length of life." That wording raises questions about whether HHS officials will be engaged in decisions that have traditionally been made by insurers—including making coverage decisions, setting rates, creating incentive programs or designing benefits.

How Much Is Enough?

Another question centers on what level of coverage HHS officials will require insurers to provide.

"My concern is that they will set the minimum so generously that it will be difficult to make it affordable—and subsidies will have to be high and rich to enable people to get that coverage," said Nancy L. Johnson, a former GOP House member from Connecticut. In other words, if HHS officials decide that the typical employer-sponsored insurance plan covers a wide range of expensive services, then the cost of insurance could be high. The law provides subsidies for coverage for people earning up to four times the federal poverty level, so the federal government would be picking up some of the costs of that insurance for many Americans.

A third issue arising from that language is the definition of "discriminate" and how far federal officials will go in making sure policies are not discriminatory.

Sara Rosenbaum, chairwoman of the Department of Health Policy at the George Washington University School of Public Health and Health Services, sees the provision as "a major advance in the law," noting that the Americans with Disabilities Act does not apply to private insurance.

However, the discrimination language does not mean that insurance companies must stop placing limits on the amount of care patients get. For instance, insurers will probably be able to continue putting limits on services—say, restricting care to a certain number of days of treatment—as long as the limits apply to everyone.

It is not yet known whether federal officials will pore through treatment guidelines and coverage exclusions that are buried in insurance documents that most patients don't read in order to make sure there are no policies that treat people with certain conditions differently.

"Once you're in the weeds of coverage, plans wanting to limit their exposure have ways to do that," said Rosenbaum.

All of these issues have the potential to significantly change insurance practices and the practice of medicine.

"The question is, what do a lot of these terms mean? There's no legislative history on it. How much does the secretary exert her power over coverage?" said Rosenbaum. "It's going to be a huge fight. This is one of the foundational aspects of the law."

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