By Rebecca Adams, CQ HealthBeat Associate Editor
November 20, 2012 -- After months of delay, the Centers for Medicare and Medicaid Services has finally released a proposed rule that establishes the essential benefits that health insurance plans must offer under the health care law.
The proposed rule also included standards on how the actuarial value of plans would be determined.
Separately, the Centers for Medicare and Medicaid Services (CMS) issued a guidance to states on the types of benefits that Medicaid programs must include if they expand coverage under the health care law (PL 111-148, PL 111-152).
Under the essential benefits proposed rule, health plans in the individual and small-group markets—both in and outside of the new exchanges—would have to provide coverage in the 10 categories of services that the health care law requires.
Essential health benefits have to equal those offered in a typical employer plan in a state, which serves as a benchmark plan. If a state doesn't choose a plan as a benchmark from one of several options, then Department of Health and Human Services (HHS) officials will use the largest small-group plan in the state as the default. Government officials could switch the choices of benchmark plans after 2015.
The proposed rule would extend the deadline for states to select a benchmark plan until the comments are due, which is on Dec. 26. Originally, states were supposed to select their plans in the third quarter of this year, before Oct. 1.
HHS officials had previously issued bulletins on both essential health benefits and actuarial value. The agency received more than 11,000 comments on both documents.
Wider Drug Coverage
One change from the bulletin is that the proposed rule would allow for broader coverage of different prescription drugs.
Under the bulletin, HHS officials had been considering only requiring coverage for at least one drug in each category and class. But comments poured in complaining that this could hurt some patients.
"A large number of commenters raised concerns about the comprehensiveness of prescription drug benefits under this potential approach," the rule said. "Specifically, many commenters indicated that a requirement to offer one drug per category and class could result in insufficient access to medications for individuals with certain conditions."
The change included in the proposed rule would require coverage either at least one drug in each class, or the number of drugs that the benchmark plan offers—whichever is more. Most current small-group plans cover more than one drug per class, so in many plans, insurers will have to cover at least two drugs in each class. The Pharmaceutical Care Management Association, which represents pharmacy benefit managers that seek discounts from drugmakers, had been worried that federal officials would mandate broader drug coverage than they ended up requiring. Some advocates had pushed for coverage of all or most of the drugs within a class.
"When plans have more flexibility to design clinically based formularies, they can negotiate bigger price concessions from drug makers and offer more affordable, generous prescription drug benefits to patients," the group said in a statement.
Actuarial Flexibility
The health care law sets up different levels of health plans. For a so-called "bronze plan," the actuarial value must be 60 percent, leaving consumers to pick up 40 percent of the costs. In a silver plan, consumers pick up 30 percent of the costs. In a gold plan, consumers pay 20 percent of costs. And in a platinum plan, consumers pay 10 percent of costs. Insurers also can offer catastrophic-only coverage for certain people.
Under the proposed rule, HHS said that consumer-driven plans, such as health savings accounts, could be acceptable if they meet all of the law's requirements.
HHS officials said they are giving plans some flexibility if they are close to meeting the value requirements to reach a certain threshold. If a plan's actuarial value is within 2 percentage points of the standard that would allow it to be offered within the bronze, silver, platinum or gold category, HHS officials will allow it. For instance, a silver plan could have an actuarial value of between 68 percent and 72 percent. The rule also would allow insurers in the small-group market to set higher deductibles in order to reach a certain coverage level.
Another clarification HHS officials made is that when insurers are tailoring their benefits, they don't have to offer the exact same benefits as the benchmark plan, but any substitutions that they make have to be within the same kind of benefit. Those limits on the kinds of changes insurers can make will mean fewer differences among plans.
"We thought they would be able to swap across categories of benefits, but it's clear now that it's within a category," said Avalere Health LLC Director Caroline Pearson. "You can't swap maternity care with rehab services."
If a benchmark plan is missing any of the 10 categories, then the proposed rule says that the state or HHS can supplement the plan in that category.
The proposal also spells out when states would have to pay insurers for state-mandated benefits beyond those that are required by the health care law. But because of the way the proposal works, that's unlikely to happen.
The health care law will not allow subsidies to pay for the cost of benefits required by state law that go beyond the essential health benefits required by federal law. States also would have to compensate health plans for such coverage.
HHS officials proposed that state-required benefits enacted on or before Dec. 31, 2011—even if they are not effective until a later date—would be counted as essential health benefits. That means states would not have to pay for these state-required benefits. Officials clarified that state-required benefits include those affecting the care, treatment, and services that a state requires insurers to offer, but not state mandates on cost-sharing, reimbursement methods, or the types of providers that can provide different services.
The regulation contains a number of details about specific services, such as clarifying that "pediatric" services mean care for anyone who is younger than 19 years old.
Varying Reactions to the Rule
Some critics of the health care law offered a measured response to the rule.
"We appreciate the administration's outreach and general restraint in these proposed regulations," said National Retail Federation vice president and employee benefits policy counsel Neil Trautwein. "It is important that essential health benefits echo available market coverage today. More extensive but unaffordable coverage would help no one in the end."
But insurers said that while the rule is better than the original bulletin, they still were not thrilled.
"While additional flexibility on essential health benefits is a positive step, we remain concerned that many families and small businesses will be required to purchase coverage that is more costly than they have today," America's Health Insurance Plans president and CEO Karen Ignagni said in a statement. "It also is important to recognize that the new EHB requirements will coincide with the new restrictions in age rating rules that also go into effect on January 1, 2014. Both of these provisions may incentivize young, healthy people to wait to purchase insurance until they are sick or injured, driving up costs for everyone with insurance."
The benefits rule also lays out a timeline for when those offering coverage in a federal exchange or state partnership exchange must become accredited.
State officials had been pressuring HHS officials to issue the regulation, saying that without details it was difficult to make decisions on such questions as whether to use a state-operated exchange, a state-federal partnership or a federal exchange.
The Office of Management and Budget had received the rules on Nov. 9.
In addition to the essential health benefit rules, CMS officials sent a guidance letter to Medicaid directors. It offers details about what types of benefits should be provided for low-income adults if states choose to expand their programs.
HHS officials also released a major rule on insurance market changes and one allowing wellness programs to beef up incentives for patients to practice healthy behavior.