What criteria and methods should the Department of Health and Human Services use in deciding the list of diagnostic, therapeutic, and preventive healthcare services which constitute the so-called essential benefits that private insurance companies must offer low- and moderate-income uninsured Americans?
That was the question the Institute of Medicine set out to determine in January. In October, it issued a 300-page report, Essential Health Benefits: Balancing Coverage and Cost, which set out the methods and criteria that the IOM recommended be used to develop a list of essential health benefits, as mandated by the Patient Protection and Affordable Care Act.
Those benefits must be offered?beginning in 2014?by health insurance exchanges, and individual and small group health insurance policies. PPACAcharges HHSwith making the final call after getting input from the Department of Labor and the independent Institute of Medicine.
Two weeks ago, HHS boiled the IOM report down to a 15-page bulletin that can be summarized in five words: Let the states do it.
The move caught almost everyone by surprise. Consumer groups quickly released critical statements noting that 50 states would mean 50 different interpretations of essential health benefits. Political observers were more pragmatic, suggesting that HHS punted the essential benefits decision to the states in an attempt to blunt potential Supreme Court case arguments that the federal government was taking over the country's healthcare system.
At the IOM, reaction to the HHS bulletin was critical, but hopeful. John Ball, who chaired the IOM committee, told me in a telephone conversation that the committee looked at essential benefits in terms of how to offer the most comprehensive, medically effective benefits at a cost that could be managed by employers and employees. "Our plan emphasized paying for care that is medically effective. I don't see that in the HHS bulletin."
The bulletin is not HHS's final word on essential health benefits. It's more of a trial balloon or a test of just what will fly and what won't.
The IOM's cost strategy looked at what a typical small business would pay for health insurance coverage in 2014 if healthcare reform wasn't in effect and suggested fitting essential benefits into that payment structure. Ball explained that the committee heard complaints about the skimpy health insurance plans offered by some small employers and thought that this approach would help make sure employees were paying for meaningful health insurance coverage.
In regard to the HHS bulletin, Ball said, "the issue of cost still very much needs to be addressed." He noted that HHS promises to revisit the issue in 2016 so "everyone will have another chance to look at costs."
The PPACA specifies 10 broad categories of medical care that must have their essential benefits defined:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Lab services,
- Maternity and newborn care
- Mental health and substance use disorder services
- Pediatric services, including oral and vision care
- Prescription drugs
- Preventive and wellness services, including chronic disease management
- Rehabilitative and habilitative services and devices
The Department of Labor took its own swing at the essential healthcare benefits effort in April 2011. Its report was barely acknowledged by HHS. Meanwhile, trade groups and lobbyist dismissed the DOL effort as irrelevant and minimalist after noting that the report was skewed toward benefits offered by large employers and had little application to individuals and small groups.
The IOM's 18-person committee composed of academics, actuaries, health system executives, health insurers and policy wonks was charged not with defining the benefits, but rather with recommending a set of criteria and methods for HHS to use in deciding the actual list of essential benefits.
The group's final report stressed medical effectiveness, safety, and costs. It provided recommendations in five areas:
- Develop a premium target. HHS should determine what the national average premium of typical small employer plans would be in 2014 and match the benefits to that premium cost.
- Define priorities. Hold a series of small group meeting around the country to discuss the benefits and costs of different plan designs, including coverage-specific services and cost-sharing.
- Ensure appropriate care. Only medically necessary services should be covered and the definition of "medically necessary" should depend on individual circumstances.
- Promote state-based innovations. HHS should grant states' requests to adopt alternatives to the EHB package only if the alternatives are consistent with PPACA requirements and do not vary significantly from the federal package.
- Update 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.
Reaction to the IOM report was generally favorable although there was grumbling from consumer groups that wanted the IOM to endorse robust benefits and to not worry so much about costs.
HHS faces a tight timeline for establishing EHB. Health insurance exchanges have already been a tough sell in many states where the political powers that be view healthcare reform as yet another federal mandate that will be costly for states to implement.
HHS took IOM's advice and conducted three listening sessions in Washington, DC for provider groups and consumer advocates, as well as one session for health plans and employers. The department also held a conference call with state government representatives to hear their thoughts on the EHB policy. HHS also held 10 sessions across the country that drew more than 1,000 participants.
HHS identified these key themes:
- Consumer groups are concerned about the IOM's emphasis of cost over the comprehensiveness of benefits while employers supported the IOM conclusion that the benefits be based on small employer plans.
- Consumer groups want specific benefits to be identified while employers said they preferred more general guidance and flexibility.
- Consumer groups are worried that about discrimination against individuals with particular conditions. Employers stressed concern about resources and asked for a moderate benefit package.
- Consumers favor a uniform benefits package that included state mandates. Employers and others focused on the need for flexibility to reflect local preferences and practices.
For now it seems that employers, health plans and government officials have won the latest battle of the benefits. HHS has announced that each state will have the flexibility to select an existing health plan to set the benchmark for the items and services included in an essential health benefits package.
States will still have to make sure that their health insurance plans cover the 10 categories of care mandated in the PPACA, but this decision provides states with flexibility in how the categories will be covered.
But remember, this was all released as a bulletin. That means HHS is testing the waters and probably expects the give and take to continue. Comments are welcome at EssentialHealthBenefits@cms.hhs.gov until Jan. 31, 2012. The final rule is expected in May.
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
