“Essential” Information

By Nevin Adams, EBRI

Nevin Adams, EBRI

About a month ago, the Department of Health and Human Services (HHS) released a bulletin outlining proposed policies that it said would “give states more flexibility and freedom to implement the Affordable Care Act.”

It did that by proposing to allow individual states to select a single benchmark to serve as the standard for qualified health plans inside the health exchange operating in their state—and for the plans offered in the individual and small-group markets in their state. The Patient Protection and Affordable Care Act (PPACA) requires that health insurance plans offered in the individual and small group markets, both inside and outside the “Affordable Insurance Exchanges” (Exchanges), offer a comprehensive package of items and services, known as “essential health benefits.”(1) This benchmark would set the standard of the items and services included in the essential health benefits package called for in PPACA.(2)

Acknowledging that “[t]There is not yet a national standard for plan reporting of benefits,” HHS also noted that PPACA does not provide a definition of “typical,” and it therefore gathered benefit information on large employer plans (which account for the majority of employer plan enrollees), small-employer products (which account for the majority of employer plans), and plans offered to public employees.(3)

However, in releasing its proposal, HHS noted that “[n]ot every benchmark plan includes coverage of all 10 categories of benefits identified in the Affordable Care Act” and that “the most commonly non-covered categories of benefits among typical employer plans are habilitative services, pediatric oral services, and pediatric vision services.”

However, HHS did at least suggest some boundaries, noting that states “would choose one of the following health insurance plans as a benchmark”:

• One of the three largest small group plans in the state;(4)

• One of the three largest state employee health plans;

• One of the three largest federal employee health plan options;

• The largest HMO plan offered in the state’s commercial market.

HHS is soliciting public input on this proposal – though comments are due by January 31, 2012. You can send comments to EssentialHealthBenefits@cms.hhs.gov

The essential health benefits bulletin is online here.

A fact sheet on the essential health benefits bulletin is online here.

The Institute of Medicine’s report on Essential Health Benefits is online here.

Note: The HHS bulletin addressed only the services and items covered by a health plan, not the cost sharing, such as deductibles, copayments, and coinsurance. HHS noted that the cost-sharing features will be addressed in future bulletins and cost-sharing rules will determine the actuarial value of the plan.

See also Paul Fronstin and Murray N. Ross, “Addressing Health Care Market Reform Through an Insurance Exchange: Essential Policy Components, the Public Plan Option, and Other Issues to Consider,” EBRI Issue Brief, no. 330, June 2009.


(1) Beginning January 1, 2014, qualified health plans sold in health insurance exchanges must cover all essential benefits. In addition, new plans sold in the individual and small group markets must cover essential benefits, regardless of whether plans are sold inside or outside of state health insurance exchanges.

(2) The following benefit classes are identified as essential benefit classes: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; pediatric services, including oral and vision care.

(3) HHS noted that it has considered a report on employer plans submitted by the Department of Labor (DOL), recommendations on the process for defining and updating EHB from the Institute of Medicine (IOM), and input from the public and other interested stakeholders during a series of public listening sessions. In 2010, Paul Fronstin, director of EBR’s Health Research & Education Program, was appointed to the Institute of Medicine (IOM) Committee on Determination of Essential Health Benefits. For more information on the essential benefits proposal, you can contact him at fronstin@ebri.org

(4) An “Illustrative List of the Largest Three Small Group Products by State” was just published by HHS, online here.