Despite a cool reception from various consumer advocates and industry stakeholders on the Obama administration’s recent guidance giving flexibility to states in designing “essential health benefits,” HHS is unlikely to deviate from those benchmark options, sources tell HRW. And as states move forward in choosing benchmarks, most probably will select existing small-group plans in their states as the model, various industry insiders tell HRW. Rhode Island’s insurance commissioner told a Feb. 3 Capitol Hill briefing that he, too, sees this approach as most probable.
Separately, a formulary analysis released Jan. 26 by Avalere Health LLC concludes that states’ choices on benchmark plans for essential benefits could have “a profound effect” on the availability of drugs for individuals buying insurance through exchanges.
“My feeling is most states will go with small-group plans, but there will be exceptions,” actuary Jim Drennan, senior director at OptumInsight, a unit of UnitedHealth Group, tells HRW. “The logic is the federal employee plan covers more, which would run the [state’s] cost up…and state-mandated benefits may or may not be covered under the federal plan. But the small-group plan has to cover state mandates,” offers reasonable coverage and won’t force higher rates than what are now in the market.
Using the state-employee plan instead would have “pluses and minuses,” he says. It may have more generous coverage than small-group plans, and “doesn’t necessarily have to cover all the mandates but probably will,” he explains, and yet it also likely would cost more than the small-group plan option. (Drennan declines to identify his state clients, but describes most as being “smaller states without large actuarial staffs.”)
For 2014 and 2015, states must select a plan equal in scope to services covered by a typical employer group plan in their state, HHS said in a Dec. 16 “bulletin” (HRW 12/19/11, p. 1). A state may choose a benchmark from among the three largest small-group plans, three largest state-employee plans or three largest federal-employee plans in the state, or opt for the largest HMO offered in the state’s commercial market. HHS proposes giving states until third-quarter 2012 to select benchmarks and, if they fail to do so, would set a default benchmark of the small-group plan with the largest enrollment in the state. Under the guidance, plans may modify coverage as long as benefits are “substantially equal” to the benchmark in 10 benefit categories designated under the reform law.
Numerous groups voiced concerns to HHS about its essential-benefits guidance. The American Academy of Pediatrics, for example, joined with other children’s health groups in worrying that HHS’s benchmark options are built around working adults, and thus “may lack important benefits for children.” The Essential Health Benefits Coalition of employer groups recommends that the essential-benefits package should contain only benefits in effect as of March 1, 2012, and not add new state mandates retroactively.
In its comments, America’s Health Insurance Plans (AHIP) said HHS should review the cost and medical evidence for state mandates and develop a framework for excluding some of them from the essential-benefits package. AHIP also urged HHS to set a deadline of no later than June 30, 2012, by which states must choose a benchmark plan.
Janet Trautwein, CEO of the National Association of Health Underwriters, tells HRW that she has had “a lot of conversations” with HHS officials and would be “surprised if they deviated from those benchmarks.” The bigger question, she says, is what HHS will decide with respect to cost sharing (including deductibles and copayments) and whether it is affordable to employers. Also, she says, consumer groups are nervous about language in the guidance related to broad substitution and actuarial equivalence for essential benefits. And multistate small employers are wondering which benchmark plan they must use. As for large employers, she says, their lifetime and annual limits are tied to essential benefits.
HHS Clarifications Are Expected Soon
Since the common objective is to “keep employers in the game” of sponsoring health coverage, Trautwein says, HHS is expected to clarify such issues soon. “We’ve been told it’s coming in the next few weeks,” she said Feb. 8. As for the final rule on essential benefits, HHS officials told her during the week of Jan. 30 that they intend to pay close attention to public comments before issuing regulations. There has been speculation in the media that the regulations won’t come out before the fall elections.
Trautwein notes that if a state chooses a small-group plan, there is a downside in the form of affordability for individuals. Such a benchmark “would provide broad coverage and hopefully a large range of cost sharing,” she says, but it’s also much richer coverage than current individual-market offerings. Thus, it “definitely will cost more for individuals than what they are currently paying,” she says, and if small employers send their employees to the exchange, “even if coverage is subsidized, it starts from a higher place because it’s richer coverage.”
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