Since the passage of the Affordable Care Act (ACA) in March 2010, health policy experts and health lawyers have been working around the clock to comprehend and respond to an unprecedented number of proposed and final regulations. Noticeably absent from a myriad of federal rules that have been issued are those setting forth a specific list of essential health benefits states must offer as part of the qualified health plans they sell within their health insurance exchanges. For almost two years, health care stakeholders have awaited the issuance of a rule expressing what benefits must comprise the essential health benefits of qualified health plans sold in states’ health insurance exchanges.
On December 16, 2011, the Secretary of HHS, devolved her authority under the ACA to decide what constitutes an “essential health benefit” to the individual states. While the ACA expressly requires each state’s essential health benefits packages to include ten categories of health care services, including treatment of mental health and substance use disorders, the Secretary’s decision to afford the states’ flexibility in deciding which among four type of health plans will serve as the plan to which the states will benchmark their essential health benefits provides the states great control over the design of the qualified health plans they will sell to consumers of their health care exchanges. Thus far, the Secretary’s decision to assign design of essential health benefits to the states, coupled with few federal guidelines, has engendered fear among many health policy experts that essential health benefits will vary greatly from state to state, thus undermining the non-discriminatory provisions of the ACA.
Understanding how the Secretary’s decision could result in the creation of numerous distinct essential health benefits packages requires understanding the interactions between state and federal laws which regulate the benefits included in the four types of insurance plans states may use to determine the “essential health benefits” they will offer as part of their qualified health plans. In a Bulletin issued on December 16, 2011, the Secretary permits states to determine the nature of their essential health benefits packages by selecting any one of the four following insurance plans as a benchmark plan for essential health benefits.
- the largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market;
- any of the largest three State employee health benefit plans by enrollment;
- any of the largest three national FEHBP plan options by enrollment; or
- the largest insured commercial non-Medicaid Health Maintenance Organization (HMO) operating in the State.
The Secretary proposes that the services offered in a state’s essential health benefits package be “substantially equal” to the services provided within one of these four types of health plans. The ACA expressly states that essential health benefits must encompass the ten categories of services identified in the ACA.1 Additionally, the ACA expands application of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) to the essential health benefits packages comprising qualified health plans sold in both the small group and individual health insurance markets.
The type of law governing the permitted essential health benefits benchmark plan types informs the benefits that must be offered should a particular plan be selected as the plan to which to base a state’s essential health benefits. Where a state chooses a benchmark plan regulated by state law, such as a state employee plan, except where exemptions apply, for years 2014 and 2015, the state-mandated benefits included within the “state regulated” benchmark plan can be rolled into the state’s essential health benefits package at no additional cost to the state. This is not the case where a state selects a non-state regulated plan as its essential health benefits benchmark plan and wishes to roll additional state-mandated benefits, not covered by the benchmark plan, into the state’s essential health benefits package. Section 1311(d)(3)(B) of the Affordable Care Act requires States to defray the costs of state-mandated benefits in excess of the states’ essential health benefits for individuals enrolled in any qualified health plan in either the individual market or the small group market.
Currently, there are more than 1,600 specific service and provider coverage requirements across the 50 states and the District of Columbia.2 Several states have mental health parity mandates or mandates for coverage of autism. In today’s harsh economic environment, what is to encourage a state struggling to balance its budget to enact legislation that expands its mandated benefits to include mental health parity or autism coverage? Where proposed federal guidance requires a state to assume the costs for any benefits offered in its essential health benefits package that exceed what’s offered in the state’s selected benchmark plan, a state may be enticed to abandon the enactment of additional state benefit mandates or rescind or eliminate current mandates. The most recent guidance on essential health benefits suggests any state-mandated benefits enacted after the December 2011 issuance of the Secretary’s Bulletin cannot be rolled into a state’s essential health benefits benchmark plan, absent the state being liable for additional costs arising from the additional coverage.
States have begun to inventory the health plan products sold within their states, so they can accurately identify the multiple health plans from which they can select a benchmark plan to which to peg their essential health benefits. Each state offers unique state-mandated benefits. To prevent the erosion or elimination of strong state benefit mandates, such as autism coverage mandates and mental health parity mandates, states with strong state-mandated benefits must be careful to select a benchmark plan which does not incentivize the reduction or elimination of coverage for mental health diagnoses.
The Secretary’s decision to assign design of essential health benefits packages to the individual states need not be a race to the bottom. Numerous advocates of mental health and substance use patients have asked federal regulators to consider establishing a national model of mental health/substance use disorder benefits that may serve as a floor for the package of mental health/substance use disorder services required to be offered within states’ essential health benefits. With the creation of a federal floor for mental health and substance use disorder benefits, Americans could benefit from knowing a certain minimum set of mental health diagnoses will be part of their insurance product.
The legislative intent of the ACA, which envisions eliminating discrimination against the insured as a result of their type of illness, is not violated if an individual state, complying with a federal floor on mental health coverage, opts to expand the mental health and substance use coverage offered within its essential health benefits. Each state should have the option to be innovative in its essential health benefits design; each state shall not have the option to be deficient in its essential health benefits design.
The final word is not out on state design of essential health benefits; we must encourage the Secretary to act in accordance with the non-discriminatory legislative intent of the ACA by setting a floor for what must be covered within a state’s mental health and substance use disorder services category of essential health benefits.
- The ACA requires coverage of the following 10 health service areas: 1) ambulatory patient services, 2) emergency services, 3) hospitalization, 4) maternity and newborn care, 5) mental health and substance use disorder services, 6) prescription drugs, 7) rehabilitative and habilitative services and devices, 8) laboratory services, 9) preventive and wellness services and chronic disease management, and 10) pediatric services, including oral and vision care.
- Of these 1,600 state mandates, about 1,150 are benefit mandates and 450 are provider mandates.