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HHS Defers to States in Initial Essential Benefits Bulletin

By Nellie Bristol, CQ HealthBeat Associate Editor

December 16, 2011 -- Federal officials stopped well short of issuing a detailed rule on what "essential benefits" must be included in the new health exchanges. Instead, they issued a pre-regulatory bulletin that says states will have the flexibility to choose from four different coverage options already available in their states, an approach that could result in different benefits throughout the country, advocates said.

Health and Human Services (HHS) officials said this bulletin will guide them as they write the regulations in the future. But clearly they are sensitive to the fact that state officials have complained that it's difficult for them to develop their exchanges without a key element: what benefits they have to offer.

"HHS is releasing this intended approach to give consumers, states, employers and issuers timely information as they work toward establishing exchanges and making decisions for 2014," the agency news release said.

Under the approach, states would develop their benefit packages based on coverage in one of the three largest small-group plans in the state; the state employee health plans, or from the federal employee health plan options. They also could choose the largest HMO plan offered in the state's commercial market. States not choosing a benchmark would automatically be assigned an essential benefits package equal to the small-group plan with the largest enrollment in the state. HHS officials told reporters the method is similar to that used to define benefits in the State Children's Health Insurance Program and for some Medicaid recipients.

"It recognizes that issuers make a holistic approach in constructing a package of benefits" that "balance consumer needs for comprehensiveness and affordability," said Sherry Glied, HHS Assistant Secretary for Planning and Evaluation. The approach will be used for 2014 and 2015, after which the agency will evaluate the results and develop a process for updating benefits and taking into account innovations in care, she added.

The health care overhaul (PL 111-148, PL 111-152) requires coverage in preventive care, emergency services, maternity care, hospital and physician services, mental health and substance abuse, and prescription drugs. It also requires coverage of items and services in rehabilitative and habilitative services, laboratory services, and pediatric care including dental and vision. If a state selects a plan that does not cover all of those categories, it must look at other plans to fill the gaps. States could modify coverage within a benefit category if it doesn't reduce the value of the coverage.

The approach is intended to gives state the flexibility to choose a plan that is equal in scope to services covered in a typical employer plan in their state, according to HHS documents.

But Carl Schmid, deputy executive director of The AIDS Institute, said the methodology "was not what we expected" and allows a range of coverage in different states. "This is very clever. We were looking for some federal protections, for a federal floor to the benefit design. It looks like we're not going to get that and we're still going to get the state patchwork of care," he said.

Schmid said the agency also failed to provide any guidance on copays, deductibles and premiums, "which is important, extremely important." HHS said in the bulletin that cost sharing would be addressed in future announcements and that those rules "will determine the actuarial value of the plan."

For people with HIV, the bulletin includes some alarming news, Schmid said. For example, the proposal is to include coverage for one drug per class. People with HIV often take a variety of drugs, most of which are in a single class: anti-retrovirals. What they are proposing, Schmid said, is less than what is available under the Medicare Part D prescription drug program. "This is a real concern to us," he said.

The American Cancer Society Cancer Action Network said that, although the method does offer flexibility, it also has concerns about the uncertain levels of coverage.

Families USA Executive Director Ron Pollack, an administration ally, said in a statement that this bulletin is a "first step," but also expressed concern.

"We understand the inclination to balance flexibility, comprehensiveness of coverage, and cost in developing the essential benefits standard," Pollack said.

"To the extent that the states select plans that do not provide comprehensiveness or short-change one of the 10 benefit areas or health plans appear to be offering benefits that are skewed to avoid providing coverage for people with major illnesses or disabilities, very significant adjustments are going to have to be made," Pollack said in an interview.

He said particular attention will have to be paid to some categories, such as rehabilitative, habilitative or mental health and substance abuse services that often are not provided in some employer plans. "To the extent that health plans provide minimal services in those areas because they're trying to keep out the very people who need rehabilitative and habilitative services or mental health services, those are things that are going to have to be rectified."

Pollack said he also has some concern that one of the benchmarks being used are small business plans and whether the scope of services are adequate in such plans.

One group had an even stronger reaction. Debra L. Ness, president of the National Partnership for Women and Families, said in a statement that the benefits determination method is "deeply disappointing and jeopardizes the promise of health reform for millions of women" by ignoring health law directions to "develop a detailed package that would apply uniformly to plans across the nation."

She added: "If essential benefits are left to the states and based on insurance plans sold on the market today, we will miss the opportunity to ensure consumers get the coverage they need and pay for. We will also miss the change to prohibit discriminatory benefit packages, which was a key advance and one of the measures that made reform so historic and meaningful for women."

Steve Larsen, head of the Center for Consumer Information and Insurance Oversight for the Centers for Medicare and Medicaid Services, said states have made decisions about "what benefits are appropriate in that particular state," adding "you do end up with some differences."

Nonetheless, Glied said most plans do cover most of the categories listed in the health overhaul. The three areas that receive the least coverage, as reflected in Pollack's comments, are habilitation and pediatric vision and dental services. In addition, Glied said research shows "there is very little variation among plans in scope of services" for most care. Most variation, she said is generally around cost sharing requirements.

An Office of the Assistant Secretary for Planning and Evaluation Research Brief also said "it appears that small group products and State and Federal employee plans cover similar services." However, service in preventive care, basic dental, acupuncture, bariatric surgery and hearing aids "appears to vary across and within markets."

Critics of the health overhaul didn't find any solace in the flexibility the federal government plans to give to the states.

"There is no question essential health benefits will increase the cost of insurance for almost every American," said Sen. Orrin G. Hatch, ranking Republican on the Finance Committee. "The framework proposed by the administration takes away the right of individuals to choose the health care plan that best fits their needs. Unfortunately, the partisan health care law is bending the health care cost curve in the wrong direction with more mandates, regulation, and price controls."

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