States given leeway in deciding ACA 'essential benefits'

The Obama Adminstration announced today that it plans to give states flexibility in determining what “essential benefits” insurers must offer in their health policies starting in 2014 (Source: “HHS Gives States Flexibility On Health Law's 'Essential Benefits',” Kaiser Health News, Dec, 16, 2011).

Determining essential benefits is considered one of the most consequential aspects of the ACA, with sharp debate on how broadly the term “essential” should be applied. According to a fact sheet released by HHS, states have four choices for designing a benchmark insurance package.

It can be based on:
•    One of the three largest small group plans in the state by enrollment;
•    One of the three largest state employee health plans by enrollment;
•    One of the three largest federal employee health plan options by enrollment;
•    The largest HMO plan offered in the state’s commercial market by enrollment. 

“Coverage that works in Florida may not work in Nebraska, so this approach allows states to tailor their package to the needs of their own residents,” said HHS Sec. Kathleen Sebelius.

While states are likely to welcome the flexibility, some consumer advocates expressed disappointment in the proposal.

“We wanted a strong national standard, not a lot of variability state-to-state,” said Ryan Clary, director of public policy for Project Inform, a San Francisco-based group that advocates for people with HIV/AIDS.  “My understanding is that some state employee plans are pretty weak and if benefits are tied to that, it might lead to weak insurance plans.”