The government moved a step closer Friday toward defining what “essential benefits” would be offered by companies selling coverage to millions of Americans in new insurance exchanges.
In a 297-page report, the Institute of Medicine, a federal advisory panel, laid out criteria and methods the Department of Health and Human Services should use in developing the package. But, as expected, the report left to HHS the job of deciding specific benefits.
The panel said HHS must consider both cost and effectiveness of the package – including what the average cost of health insurance will be for small employers in 2014, when the federal health law fully takes effect and exchanges launch.
But one of the outside experts asked by the panel to review the report said in an interview that its emphasis on affordability could mean less robust benefits. HHS said yesterday it hasn’t set a date for issuing rules, though they’re expected to come out in 2012.
“They made affordability the first imperative here,” said Sara Rosenbaum, health policy professor at George Washington University. “That means very limited coverage for people because of the underlying cost of health care.”
She said the panel, in advising that a benefit be medical and not educational or social, “leaves the door open to the kinds of denials” of coverage “that Congress said should not happen.”
Some insurers, for example, have refused to provide certain types of autism treatment because they have deemed them educational in nature rather than medical.
Another outside reviewer, Gail Wilensky, senior fellow at Project Hope and former head of the Medicare program under President H.W. Bush, said she was pleasantly surprised the panel emphasized affordability. “I was pleased with the report,” she said, “because if you blow it on the affordability side you blow the whole goal of extending coverage.”
The report laid out broad goals:
“The (package) must be affordable, maximize the number of people with insurance, protect the most vulnerable individuals, promote better care, ensure stewardship of limited financial resources by focusing on high value services of proven effectiveness, promote shared responsibility for improving our health, and address the medical concerns of greatest importance to us all,” said the report.
When deciding on benefits, the panel said, HHS should take into account whether they would result in “meaningful improvement in outcomes” and are “supported by a sufficient evidence base.”
The panel said the federal government should allow states that administer their own exchanges to make changes to the list of essential benefits as long as those variations are consistent with the health law and are as comprehensive as the required benefits list.
The rules will apply to all policies offered to individuals and small businesses on the health exchanges created under the 2010 Affordable Care Act. About 26 million Americans will get coverage through the new exchanges by 2016, according to the Congressional Budget Office.
Larger employers could also be affected by the list of essential benefits. “Whatever the government deems to be essential benefits could be seen by employees and others as a benefit floor for all plans, including employer plans, over time,” said Steve Wojcik, vice president of public policy at the National Business Group on Health.
HHS Secretary Kathleen Sebelius said she would review the panel’s report and hold a series of “listening sessions” across the country to get public comment.
America’s Health Insurance Plans CEO Karen Ignagni applauded the report for its attention to cost and medical effectiveness. “It is critical that the final regulation maintain flexibility and affordability for consumers and employers,” she said.
The Obama administration faces a balancing act: The benefits package must be broad enough to be comprehensive but not so broad as to be unaffordable to policyholders and employers – or a burden on taxpayers.
Under the law, the government will subsidize premiums for individuals on a sliding scale up to 400 percent of the federal poverty level and offer tax credits to some small businesses. If the premiums are too high, even with subsidies, some people instead might opt to pay the penalty imposed on those who fail to purchase health insurance once the exchanges begin operation.
The health law outlines 10 broad categories of coverage – such as hospital and emergency services, prescription drugs, childbirth and pediatric care – but it leaves to HHS the specifics of what must be in the benefits package. The law does require, however, that the package be equal to the benefits provided in a typical plan offered to workers with employment-based coverage.
Policies also must limit out-of-pocket-costs — the amount policyholders pay in deductibles and copayments — to no more than $6,000 per year for an individual or $12,000 for a family.
Currently, benefit packages are established by insurers, sometimes in conjunction with employers who are purchasing them. Insurance plans typically cover a wide range of services, from emergency room care to hospitalization and doctor office visits, provided that the treatments are deemed medically necessary. Some treatments, such as cosmetic surgery, are generally not covered.
Advocates have succeeded in getting states to require coverage for specific treatments and conditions. Some states, for example, mandate coverage for infertility treatments, autism therapy, Lyme disease, hearing aids or prosthetic limbs. Some states specify what specialists must be covered, ranging from acupuncturists and dentists to massage therapists or pastoral counselors.
Under the health law, states can continue to impose coverage requirements not included in the essential benefits package – but they would be responsible for paying insurers the additional costs for those benefits in policies sold through state exchanges. Just how specific HHS will be in defining essential benefits remains unclear. The advisory report recommended that HHS be as specific as possible.