HHS announced on Friday their proposal to allow states a good deal of flexibility in terms of defining “essential benefits” required for health insurance policies that will be sold in the health benefits exchanges starting in 2014.
Rather than federally mandating what essential benefits have to be covered by policies in the exchanges, HHS is proposing that states be allowed to set their own rules based on the benefits packages that are offered by a typical relatively large employer in the state. All states will be allowed to select from ten possible options in order to define the “essential benefits” package for their exchange. Colorado will be able to choose one of the following benefit designs in order to set the minimum benefit requirements for plans that will be sold in the exchanges:
- One of the three largest small group plans in Colorado
- One of the three largest Colorado state employee health insurance plans
- One of the three largest federal employee health plans
- The largest HMO offered in the commercial market in Colorado
As an additional requirement, the plans will have to meet PPACA guidelines in terms of providing coverage in at least ten categories of care (ambulatory patient services, emergency care, hospitalization, maternity and newborn care, mental health and substance abuse services, prescription medications, rehabilitative services, lab work, preventive care/disease management, and pediatric care). It’s likely that the ten existing plan options each state will be considering already provide benefits in all or nearly all of those areas, given that they represent relatively large employers, and those plans tend to be comprehensive. But if a state selects a plan to use as a benchmark and it doesn’t include coverage in all ten areas, the state will have the option to look at the coverage provided by other benchmark plans (including the Federal Employee Health Benefits Plan) in order to set the basic standards required for plans sold in the exchanges.
Colorado already has a comprehensive small group benefits mandate. Until this year, one of the most glaring differences between small group and individual plans was that individual policies in Colorado were not required to cover maternity. But that changed in January when all new and renewing individual policies had to begin covering maternity. I would say that the primary difference now between most of the individual plans and small group plans in Colorado is that the small group policies are guaranteed issue, whereas the individual plans are medically underwritten. But in 2014, when the exchanges get underway, the individual policies will be guaranteed issue too. Individual policies are still quite a bit less expensive than group policies in Colorado, but I wonder if that will change too once the exchanges get underway? It would seem so, since the benefits and underwriting will be virtually identical.
The small group market in Colorado is already quite structured by state mandates. The individual market also has quite a few mandates, including the new maternity benefit mandate. But it appears that the individual policies that are sold in the exchanges beginning in 2014 will have benefits at least as comprehensive as the benefits offered by the largest small group plans in Colorado. That means that “bottom of the heap” individual plans (ie, the ones with tons of fine print and huge holes in their coverage) probably won’t be making an appearance in the exchange, or at least not without a serious overhaul.
HHS is taking comments and feedback on the proposed guidelines through the end of January.