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States May Opt for Small-Business Model for Essential Benefits, Commissioner Says

By Jane Norman, CQ HealthBeat Associate Editor

February 3, 2012 -- The Rhode Island insurance commissioner predicted last week that many states may opt to use existing small-business plans in their states as models for their essential benefits packages under the health care law.

In addition, Christopher Koller said that the approach adopted by the Department of Health and Human Services to allow states to use flexibility in determining their approach will put them on track toward getting exchange packages and benefits up and running by 2014. "As an implementer in the states, what they have done is give me a road map so we can at least put this in place in the next year and a half," he said.

States are expected by Jan. 1, 2013, to demonstrate that they can run their exchanges, and the exchanges are supposed to be up and running by the beginning of 2014. They also must adopt plans for essential health benefits.

Rhode Island, under Gov. Lincoln Chafee, an independent, is one of the states considered to have made the most progress in constructing its exchange. Rhode Island received a $58.5 million Level Two exchange grant in November from HHS. Koller was also a member of an Institute of Medicine panel that made recommendations last year on how the benefits should be structured.

Koller's remarks came during a discussion on essential health benefits sponsored by the nonpartisan Alliance for Health Reform and The Commonwealth Fund. The Department of Health and Humans Services (HHS) in December issued a bulletin outlining how these minimum coverage standards will be defined when individual or small-business plans are sold inside or outside state-run exchanges when the health law is fully in force in 2014.

Instead of laying out one standard package that would be used in all states, HHS said it would give states the leeway to pick a benchmark plan that covers 10 categories of care defined in the health care law (PL 111-148, PL 111-152). States can select among four options—any of the three largest small-group plans by enrollment, any of the three largest state employee health plans, any of the largest federal employee plans or the largest commercial non-Medicaid HMO.

States where lawmakers have added required benefits beyond those packages will have to add them to their benchmark plans.

Many questions are swirling around this essential benefits issue, participants in the discussion acknowledged. And HHS officials have said they will be offering additional guidance and rulemaking at some point. Criticism of the bulletin has centered around the idea that there may be wide variation among states rather than a single national benefit package.

Koller, though, said he thinks the government struck a balance between affordability and a comprehensive package. "I think they threaded that needle very carefully," Koller said. While he said he might wish they had "set the bar higher" and relied more on the recommendations in the Institute of Medicine report, momentum has to be maintained, Koller said.

"I don't pretend to speak for all the states" but there will be a "strong impetus to default to the small-group options because they are the ones commercial regulators know the best," Koller said. Those are plans state regulators have already approved.

There also needs to be clarification on who will make the final decision about which benchmark plan will be used, he noted. "Is it the legislators? Can the executive branch do it?" he asked. "We need to work on that."

Another panelist, Janet Trautwein of the National Association of Health Underwriters, said the vast majority of insured people today are covered by large and small employers. And she said that coverage in both markets is "extremely comprehensive" despite fears by some that the small-business model won't be adequate. Trautwein, who represents insurance brokers, said that a December survey by her group found people with employer-sponsored coverage, for example, receive emergency care and hospital care under every health plan.

Using the benchmark idea may allow states to move more quickly to create their packages. But mandates for coverage do differ from state to state, she said.

One of the most common questions surrounding the benefits packages is affordability, and employers are worried about whether they will be able to continue to offer coverage to their workers, Trautwein said. Workers are worried about whether they can foot the bill for their share. If cost is not taken into account, it will make affordable coverage difficult for both sides, sending workers into the exchanges, she said.

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