States given more flexibility in defining EHBs. What would Exchange Development mean for your patients and organization?

For states who have been putting it off, some recent clarification on how essential health benefits (EHBs) are to be defined could provide a nudge towards building an insurance exchange.

On December 16^th, CMS’s Center for Consumer Information and Insurance Oversight proposed that states use an existing health plan to define the benefits to be included in individual and small-group plans beginning in 2014. This was unexpected; many believed that a national EHB standard would be developed and issued. This bulletin may permit states to offer less inclusive coverage than is now required by state law.

Exchange Development: Is It Good For Your Organization?

Giving the states a certain level of flexibility in plan design was an important decision. Whether it will become a trend – to accept more variation by state, or to create federal-level mandates for the products and pricing available through the exchanges – remains to be determined.

Some states might have decided against launching an exchange if the Department of Health and Human Services had required all qualified health plans to include a comprehensive level of essential benefits. However, it appears that does not seem imminent at the moment, giving the states some leeway and avoiding a potential political problem.

But some states still might not act because they are hesitant to embrace reform law provisions. Consequently, the default benchmark plan (i.e., the largest plan in the state’s small-group market) will be implemented. However, ultimately states will have to choose a plan that balances costs and quality of benefit structure.

The bulletin released in December calls on states to set a ‘benchmark’ to include in the essential benefits package. To do this, states must pick an existing and popular plan. There are four benchmark plans to choose from: (1) one of the three largest small-group plans in the state; (2) one of the three largest state employee health plans; (3) one of the three largest federal employee health plan options; or (4) the largest HMO offered in the state’s commercial market.

In addition, the reform law outlines 10 broad categories — including emergency services, maternity and prescription drugs — that need to be assimilated into plan design. If states choose a benchmark plan that doesn’t include all of those 10 categories, they will likely be able to borrow from other benchmark plans to fill in the overall benefit. Hence the final benchmark plan could be a fusion of more than one plan design. Enabling states to define a benchmark based on their most popular plans will help increase acceptance and action.

If a state uses one of its own plans as the benchmark, the Affordable Care Act requires that the cost of ‘essential’ (mandated by the HHS) benefits must be paid for by the state. But the bulletin suggests that states will be allowed to define any or all existing state mandates as essential.

Further, a common benchmark being utilized by states could make it easier for state insurance exchanges to certify qualified health plans. And with input from health plan operators, state legislatures will need to study and evaluate the enrollment and cost data to help ascertain which benchmark plan will be used to define its EHB.