On Feb. 17, 2012, the U.S. Department of Health and Human Services (HHS) issued guidance in the form of FAQs (frequently asked questions) addressing the requirement for insurers to provide coverage of "essential health benefits" under the Patient Protection and Affordable Care Act (PPACA).
The FAQs provide additional guidance on HHS’ approach to defining essential health benefits as described initially in a Dec, 16, 2011, HHS Bulletin. (See the SHRM Online article HHS to Give States More Flexibility to Set 'Essential Health Benefits.')
Under the PPACA, nongrandfathered individual and small group plans must at least match the coverage provided by a benchmark plan selected by the state that regulates the plan. Possible benchmark plans that a state may choose are:
• One of the three largest small group plans in the state.
• One of the three largest state employee health plans.
• One of the three largest federal employee health plan options.
• The largest health maintenance organization (HMO) plan offered in the state’s commercial market.
The new FAQs clarify several points including the following:
• A state will not be permitted to adopt different benchmark plans for its individual and small group markets.
• If a benchmark plan is missing coverage in one or more of 10 statutory categories, the state must supplement the benchmark plan by reference to another benchmark plan that includes coverage of services in the missing category. The 10 categories of care are ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services including oral and vision care.
• HHS will allow insurance issuers to deviate from the benchmark plan in order to substitute services within the 10 statutory categories of services as long as the substitutions are actuarially equivalent and as long as they do not violate other statutory requirements.
• HHS found that pediatric oral services, pediatric vision services and habilitative services are not included in many health insurance plans. Thus, the Bulletin and FAQs indicate that HHS may propose special rules be applied to ensure meaningful benefits in those categories. With regard to pediatric oral care, for instance, the FAQs indicate that HHS is considering a requirement that states must supplement the benchmark plan with benefits from the Federal Employees Dental and Vision Insurance Program (FEDVIP) plan with the largest national enrollment or the state’s Children’s Health Insurance Program (CHIP).
• Under the PPACA, self-insured group health plans, large group market health plans and grandfathered health plans are not required to offer essential health benefits. However, the prohibition on imposing annual and lifetime dollar limits on services deemed to be essential health benefits applies to all plans.
Compliance Questions Remain
"The FAQs do go some distance toward clarifying a number of the issues left open by the initial bulletin," commented Timothy Jost, a professor at the Washington and Lee University School of Law. Writing at the Health Affairs blog, Jost noted, "The approach selected by HHS will allow states to maintain their coverage mandates (or at least those that apply to the small group market) until 2016 but will preclude the addition of new mandates. It is still hard to imagine how this is all going to work out in practice, however, and more to the point how plan compliance will ever be monitored, given the ability of plans to substitute services within categories. One must wonder whether in the end it might not have been more straightforward simply to come up with a federal menu of services."
Small Group Plans and Essential Health Benefits
The Affordable Care Act defines a small employer as having at least one but no more than 100 employees. However, it provides states the option of defining small employers as having at least one but not more than 50 employees in plan years beginning before Jan. 1, 2016.
Generally, if you have fewer than 100 employees (using the definition for full-time equivalents) you will be purchasing coverage in the small group market.
Starting Jan. 1, 2014, nongrandfathered, fully insured plans in the individual and small group market and those in the exchanges are required to provide coverage of benefits or services in 10 separate categories that reflect the scope of benefits covered by a typical employer plan.
Self-insured small group plans, large group plans, and grandfathered plans are not required to offer essential health benefits.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
HHS to Give States More Flexibility to Set 'Essential Health Benefits,' SHRM Online Benefits Discipline, December 2011
SHRM Online Benefits Discipline
SHRM Online Health Care Reform Resource Page