Balancing adequacy and affordability?: Essential Health Benefits under the Affordable Care Act
Introduction
In the United States, the regulation of commercial health insurance has traditionally been the domain of the states (see [32]). However, the Affordable Care Act (ACA) significantly changes the American healthcare system in numerous ways and it directly affects the operation of state insurance markets through its various provisions [22]. One of the most visible areas of this most recent federal initiative is the requirement that health plans sold in insurance marketplaces must offer a variety of services, including ambulatory patient services, prescription drugs, and emergency services, termed Essential Health Benefits (EHB). Although the Department of Health and Human Services (HHS) was tasked with the regulatory development of these EHB under the ACA, the department quickly devolved this task to the states. This assessment sheds light on the development and implementation of the EHB, a topic that has received little attention in the media and scholarly literature.1 Moreover, it also provides background on the development of insurance benefit packages in the United States and offers and outlook to the upcoming EHB revisions in 2016.
From a policy perspective, the development and implementation of the EHB afforded policymakers an excellent opportunity to set healthcare priorities and to make fundamental decisions for their health insurance markets about how to balance coverage and affordability. Ideally, these decisions should have been based on policy expertise, i.e. a sound understanding of opportunity costs. Not surprisingly, states fully exploited the leeway provided by HHS, and state decision processes and outcomes differed widely. However, none of the states took advantage of the opportunity to restructure fundamentally their health insurance markets, and only a very limited number of states actually included sophisticated policy expertise in their decisionmaking processes. As a result, and despite a major expansion of coverage, the status quo ex ante in state insurance markets was largely perpetuated. However, the 2016 revisions provide an opportunity to address these previous shortcomings.
Section snippets
Insurance regulation prior to the Affordable Care Act
Insurance regulation in the United States is rather complex because it generally involves an intricate combination of state and federal jurisdictions. Perhaps the most visible case of health insurance regulation can be found in the form of insurance mandates, i.e. the minimum insurance benefit packages that insurance plans have to provide.2
The Affordable Care Act and Essential Health Benefits
The EHB provisions of the Affordable Care Act (ACA) directly infer with the states’ regulation of commercial insurance plans by requiring that eligible plans provide coverage for certain very broadly defined service categories, limit consumer cost-sharing, and meet certain actuarial value requirements termed Bronze, Silver, Gold, and Platinum. In combination, these requirements aim toward a comprehensive benefits package at an affordable price to millions of Americans. Moreover, marketplaces
Deferring to the states: implementation decisions by the federal government8
Given the extent of the task, the ACA delegated much of the practical development of the EHB package to the HHS. The HHS, already taxed with other extensive regulatory requirements under the ACA and concerned about the long-time frame for developing federal regulations, took a two-pronged approach [36], [1]. First, it asked the Institute of Medicine (IOM) with the development of general guidelines for defining the EHB. The IOM expressed grave concerns about the extent of certain state mandates
Implementation by the states: wide variation, little concern for costs and affordability
States had to report their decisions regarding the selection of a benchmark plan for EHB to the HHS by October 2012. The approaches used to select the benchmark plan were diverse, including selection by the state department of insurance, the governor, or the legislature [18]. In terms of process, as shown in Table 1, about 60 percent of states formed a work group (30 states and D.C.), conducted an analysis of existing benefit mandates (31 and D.C.), or assessed benchmark plan options (33 and
Looking ahead to 2016
The HHS has stated that it intends to review its approach to the EHB package for 2016 [11]. While the previous approach allowed for local values and preferences to shape decisionmaking, it may also be cause for concern, as benefit packages vary significantly across the country. As a result, consumers may be unaware of what services are covered, particularly after a move across state lines. Over the long run, there may be adverse selection effects, as healthier consumers and companies,
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