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IOM Details Essential Health Benefits, Emphasizes Cost

Margaret Dick Tocknell, for HealthLeaders Media, October 7, 2011

The criteria used to define essential health benefits should include medical effectiveness, safety, and their relative value compared with alternatives, according to a report released Thursday by the Institute of Medicine.

Essential Health Benefits: Balancing Coverage and Cost sets forth the methods and criteria that the IOM recommends be used to develop the actual list of essential benefits. That big job will fall to the Department of Health and Human Services.

As required by Patient Protection and Affordable Care Act, beginning in 2014, health insurance exchanges, as well as individual and small group health insurance policies must offer these essential benefits.

To balance cost and affordability of the essential benefits package, the IOM recommends that the essential benefits reflect "the scope and design of packages offered by small employers today." Consumer groups had hoped that the IOM would opt for a more robust list of benefits. 

The 300-page report provides recommendations in five areas:

  1. Developing a premium target. The report recommends that HHS determine what the national average premium of typical small employer plans would be in 2014 and match the benefits to that premium cost.
  2. Defining priorities. The report recommends a series of small group meeting be held around the country to discuss the benefits and costs of different plan designs, including coverage-specific services and cost-sharing.
  3. Ensuring appropriate care. Only medically necessary services should be covered and the definition of "medically necessary" should depend on individual circumstances.
  4. Promoting state-based innovations. HHS should grant states' requests to adopt alternatives to the EHB package only if the alternatives are consistent with ACA requirements and the criteria specified in this report, and they do not vary significantly from the federal package.
  5. Updating the EHB. HHS should update the EHB package annually, beginning in 2016. Advances in medical science and cost should define the updates. A National Benefits Advisory Council should be appointed to offer external advice.

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