The Obama administration on Wednesday issued its long-awaited final rule on what states and insurers must do to provide the essential health benefits required in the individual and small-group market beginning in 2014 under the healthcare reform law.
A cornerstone of President Barack Obama’s plan to enhance the breadth of healthcare coverage in the United States, the mandate allows the 50 states a role in identifying benefit requirements and grants insurers a phased-in accreditation process for plans sold on federal healthcare exchanges.
Wednesday’s rule included few changes from previous administration proposals, a fact that could help states and insurers as they prepare for new online state health insurance marketplaces, known as healthcare exchanges, scheduled to begin enrolling beneficiaries for federally subsidized coverage on Oct. 1.
“The administration has been consistent in its approach to essential health benefits for more than a year, and that continued today. It’s good news for states and insurers because it means they don’t have to make any changes,” said Ian Spatz, a senior healthcare adviser at the consulting firm Manatt Health Solutions.
The exchanges are expected to cover as many as 26 million people within 10 years and seem likely to dominate individual and small-group insurance markets. Another 12 million people are expected to receive healthcare coverage through an expansion of the Medicaid program for the poor, according to the nonpartisan Congressional Budget Office.
Obama’s Patient Protection and Affordable Care Act sets out 10 benefit categories that must be covered by most plans at the same level as a typical employer plan. The categories range from hospitalization, prescription drugs and maternity and newborn care.
The American Cancer Society Cancer Action Network was cautious in its praise, describing the rule’s prescription drug mandate as an improvement but warning that it was unclear whether patients would have timely access to drugs needed to treat and survive serious illnesses including cancer.
The rule got a cool reception from insurance and employer groups, which warned that higher costs could result from the new coverage requirements.
“The minimum essential health benefits standard will still require many individuals and small businesses to purchase coverage that is more comprehensive and more expensive than they choose to purchase today,” said America’s Health Insurance Plans President Karen Ignagni.
Neil Trautwein, National Retail Federation vice president, said the ultimate impact of the regulation will not be felt until plans are priced and sold on the market. “The administration has tried hard to navigate between the competing concerns,” he said. “But I’m worried that people won’t be able to afford coverage.”
Insurers including UnitedHealth Group Inc., Aetna Inc. and Cigna Corp. will use the government’s final word on these required benefits as they design plans and set premium prices ahead of the exchange launches. They have each said they will sell plans on some of the exchanges, but have not yet committed to which ones.
UnitedHealth, the largest insurer, said it is still reviewing the new rule. The company said the exchange insurance plans will essentially be a new type of coverage.
“In the long term, we are expecting and preparing for an ‘exchange’ category of coverage to become established as a new benefit category between Medicaid and the traditional commercial benefits markets,” spokesman Daryl Richard said.
The U.S. Department of Health and Human Services said the rule would mean greater access to mental health and substance abuse services by requiring parity with other healthcare benefits. HHS estimated that 62 million Americans would gain mental health coverage, an issue that has risen in importance after a string of mass shootings including last year’s elementary school massacre in Newtown, Connecticut.
The final rule preserved the state role in determining how the requirements are met by selecting their own benchmarks from plans sold within their respective borders. Most states opted for their home market’s largest small-group plan.
But after two years, HHS said it would review the situation and determine whether a new approach might be necessary.
The administration kept to the benchmark rule despite objections from consumer groups who claimed that some of the selected plans were not comprehensive enough and argued for a single, uniform federal package.
But HHS officials found that maintaining states as primary regulators of state insurance markets would keep benefit offerings more in line with services typically offered through employer-sponsored plans in each state.
“The states continue to maintain their traditional role in defining the scope of insurance benefits and may exercise that authority by selecting a plan that reflects the benefit priorities of that state,” HHS said in the rule.
The administration also gave insurers the chance to phase-in requirements for plans sold on federally facilitated exchanges and denied requests from groups that wanted to exempt low-cost community health plans and Medicaid managed-care plans from the accreditation process.