Essential Health Benefits Package

Essential Health Benefits Package

The Secretary will specify the “essential health benefits” included in the “essential health benefits package” that Qualified Health Plans (QHPs) will be required to cover (effective beginning in 2014).  Plans available on the Member Health Insurance Exchange will meet the minimum requirements of Essential health benefits.  Essential health benefits, as defined in Section 1302(b) of the Patient Protection and Affordable Care Act, will include at least the following general categories:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness and chronic disease management
  • Pediatric services, including oral and vision care.

Women’s preventive health services were defined in detail via federal regulations published August 1, 2011, requiring broad coverage, without copayments or deductibles of:

  • Annual preventive-care medical visits and exams
  • Contraceptives (products approved by the FDA) – with exemptions for religious employers and a temporary enforcement safe harbor.
  • Mammograms
  • Colonoscopies
  • Blood pressure tests
  • Childhood immunizations
  • Domestic violence screenings for interpersonal and domestic violence should be provided for all women
  • H.I.V. screenings
  • Breast feeding counseling and equipment, including breast pumps at no charge.
  • Gestational diabetes in pregnant women screening
  • DNA tests for HPV as part of cervical cancer screening

2012-2013 Implementation:  New health plans are required to include these services without cost sharing for insurance policies with plan years beginning on or after August 1, 2012.  The rules governing coverage of preventive services which allow plans to use reasonable medical management to help define the nature of the covered service apply to women’s preventive services.  Plans will retain the flexibility to control costs and promote efficient delivery of care by, for example, continuing to charge cost-sharing for branded drugs if a generic version is available and is just as effective and safe for the patient to use.  (Note: 2012 health plans based on a January-December calendar year will change coverage effective January 1, 2013.)

Beginning Jan. 1, 2014, coverage provided for the essential health benefits package will provide bronze, silver, gold, or platinum level of coverage (described below).  A health plan providing the essential health benefits package will be prohibited from imposing an annual cost-sharing limit that exceeds the thresholds applicable to HSA-qualified HDHPs.   Small group health plans providing the essential health benefits package will be prohibited from imposing a deductible greater than $2,000 for self-only coverage, or $4,000 for any other coverage in 2014 (annually adjusted thereafter).   Such limits will be applied in a manner that will not affect the actuarial value of any health plan, including a bronze level plan (described below). Consistent with the immediate reforms described above, plans providing the essential health benefits package will be prohibited from applying a deductible to preventive health services.

PPACA will require the Secretary to define and periodically update coverage that provides essential health benefits. The Secretary will ensure that the scope of essential health benefits is equal to the scope of benefits under a typical employer-provided health plan (as certified by the Chief Actuary of the Centers for Medicare and Medicaid Services).   A health plan will be allowed to provide benefits in excess of the essential health benefits defined by the Secretary. 

However, if a state requires such additional benefits in QHPs, the state must reimburse individuals for the additional costs of those benefits.

Essential Benefits as Applied in 2010-2013.
While the major, nationwide requirements for essential benefits will go into effect January 1, 2014, there are at least two PPACA provisions already in effect which reference use of “essential benefits”.

  • The provision which establishes restrictions on the imposition of annual limits on the dollar value of health plans effective September 23, 2010, requiring coverage value of at least $750,000 per year, refers to the “dollar value of essential health benefits (as defined in Section 1302(b) of the Patient Protection and Affordable Care Act)”, including a waiver process that allows certain plans to have a lower total value for a one-year period.
  • The provision which establishes Medical Loss Ratios (MLRs), effective January 2011, references essential benefits as part of the calculation of actual medical payments by insurers.

Annual Limits and Exceptions

Under HHS regulations, plans offered between September 2010 and September 2011 may not limit annual coverage of essential benefits such as hospital, physician and pharmacy benefits to less than $750,000. The restricted annual limit will be $1.25 million for plan years starting on or after September 23, 2011, and $2 million for plan years starting between September 23, 2012 and January 1, 2014.

HHS has approved limited, selected waiver exemptions from annual limits for selected states or employer sponsor situations.  In February, 2011 it was announced that Florida, Massachusetts, New Jersey, Ohio and Tennessee, received waivers allowing health insurance companies to continue offering less generous annual limits on benefits. In these cases, existing state law already mandates that policies with lower annual limits on coverage be offered. The Center for Consumer Information and Insurance Oversight (CCIIO), explained that because “limited benefit plans, or mini-med plans, are often the only type of insurance offered to some workers,” the one-year waivers allow continuity.

Levels of Coverage

Beginning in 2014, PPACA will generally require QHPs to provide coverage at one of the following federally established benefit levels: bronze, silver, gold, or platinum. This requirement will apply regardless of whether or not the QHP is offered through an exchange (and premiums must be the same for QHPs inside and outside of the exchange). Excluding dental-only plans, health insurance issuers must offer a silver plan and a gold plan in the exchange. Each coverage level will be based on a specified share of the full actuarial value of the essential health benefits (see Figure 1). A health insurance issuer that offers coverage in any of these four levels will be required to offer the same level of coverage in a plan specifically designed for individuals under age 21.

Another plan option permitted under PPACA in 2014 is a catastrophic plan. A catastrophic plan will provide coverage for essential health benefits, but coverage is paid for by the insurer only after the enrollee pays deductibles equal to the amounts specified as out-of-pocket (OOP) limits for HSA-qualified HDHPs. The exact deductible will be determined for the 2014 plan year.  As an advance example, the actual OOP limits for 2011 commercial market tax-deductible HSA/HDHP combinations are $5,950 individual / $11,900 family;  for 2012 deductible limits are $6,050 individual / $12,100 family.  Such deductibles will not apply to at least three primary care visits per plan year. A catastrophic plan will be permitted only in the individual market (1) for young adults (those under age 30 before the plan year begins), and (2) for those persons exempt from the individual mandate because no affordable coverage is available or they have a hardship exemption.   By comparison federal HSA/high deductible plan minimum deductibles for 2010-11 were established to require enrollees to pay the first $1,200 of their medical expenses ($2,400 for family coverage) before insurance benefits begin.

Member Health Insurance Exchanges explained.

Private Member Health Insurance Exchange:

A private member health insurance exchange is an exchange run by a private sector company or nonprofit. Health plans and carriers in a private exchange must meet certain criteria defined by the exchange management. Private exchanges combine technology and human advocacy, include online eligibility verification, and mechanisms for allowing consumers to quote, compare, and complete enrollment.  They are designed to help consumers find plans personalized to their specific health conditions, preferred doctor/hospital networks, and budget. These exchanges are sometimes called marketplaces or intermediaries, and work directly with insurance carriers, effectively acting as an extension of the carrier.

Health Insurance Exchanges in the Patient Protection and Affordable Care Act (ACA)

President Obama promoted the concept of a health insurance exchange as a key component of his health reform initiative. Obama stated that it should be “…a market where Americans can one-stop shop for a health care plan, compare benefits and prices, and choose the plan that’s best for them, in the same way that Members of Congress and their families can. None of these plans should deny coverage on the basis of a preexisting condition, and all of these plans should include an affordable basic benefit package that includes prevention, and protection against catastrophic costs.  Insurance sold on the health insurance exchanges in the United States will be exclusively from private insurers (Aetna, United Health Insurance, Blue Cross Blue Shield, and others).

Government run Exchanges

The Patient Protection and Affordable Care Act (ACA) sets up government run insurance exchanges in each state known as American Health Benefits (AHB) Exchanges. Implementation of the individual exchanges changes the practice of insuring individuals. The expansion of this market is the major focus of President Obama’s Patient Protection and Affordable Care Act.   Studies have shown that increases in health care costs are driven by increases in per-case cost, not merely the overall prevalence of disease, thus driving the need for greater access to health coverage.

Major requirements affecting insurers in the individual exchanges:

  • Guaranteed issue: insurers will not be permitted to refuse to insure any individuals
  • Limit to price variations: prices will vary based on four factors and not beyond a total factor of approximately 10
  • Plans will be offered in four comparable tiers ranging from bronze to platinum with limited out of pocket expenses
  • Strict regulations on rescission
  • Lifetime and annual limits eliminated

Guaranteed Issue

In the individual market, sometimes thought of as the “residual market” of insurance, insurers have generally used a process called underwriting to ensure that each individual paid for his or her actuarial value or to deny coverage altogether.  The House Committee on Energy and Commerce found that, between 2007 and 2009, the four largest for-profit insurance companies refused insurance to 651,000 people for previous medical conditions, a number that has increased significantly each year (49% increase in that time period).  The same memorandum said that 212,800 claims had been refused payment due to pre-existing conditions and the insurance firms had business plans to limit money paid based on these pre-existing conditions. These persons who might not have received insurance under previous industry practices are guaranteed insurance coverage under the ACA. Hence, the insurance exchanges will shift a greater amount of financial risk to the insurers, but will help to share the cost of that risk among a larger pool of insured individuals.

The ACA’s prohibition on denying coverage for pre-existing conditions will begin in 2014.