When ERISA was enacted a provision was included to exempt employer self-insured health plans from state regulation and mandates. This was done so that employers who operate in multiple states would not have to comply with scores of different regulations and mandates. There are about 1600 different state mandates related to coverage of health care services. Each of these adds to the cost of health insurance. Now the Obama administration has decided to take the opposite approach and allow each state to determine the essential health benefits to be used by plans within its exchange effective January 2014.
States will be allowed to base their essential coverage on one of several benchmarks.
Given the track record of enacting mandates promoted by special interest groups along with providing benefits to state workers considerably above competitive levels followed by private sector employers, this decision to defer to each state may well be a recipe for higher health care premiums. That in turn translates to higher federal costs when providing the subsidies that are available to most families that will be used in exchanges. In addition, the cost of mandates in excess of the essential health benefits must be defrayed by the state. All of this is counterintuitive to affordable health care.
In effect, we are saying that government decisions on essential health benefits reflect what is essential to individuals, but that is not the always the case. We are making this process way too complicated. Very basic, nearly catastrophic coverage should be the standard. From there allow insurers to build higher level plans demanded by consumers who can then decide the coverage they need and can afford. This is not the same as the current approach of starting with generous coverage and varying reimbursement levels.
Exactly what are we attempting to make affordable? We appear to be starting with the Cadillac of coverage and working our way up.
Four Benchmark Plan Types
Our analysis of offerings that exist today suggests that the following four benchmark plan types for 2014 and 2015 best reflect the statutory standards for EHB in the Affordable Care Act:
(1) the largest plan by enrollment in any of the three largest small group insurance products in the State’s small group market;26
(2) any of the largest three State employee health benefit plans by enrollment;
(3) any of the largest three national FEHBP plan options by enrollment; or
(4) the largest insured commercial non-Medicaid Health Maintenance Organization(HMO) operating in the State.
HHS intends to assess the benchmark process for the year 2016 and beyond based on evaluation and feedback.
To reflect the State flexibility recommended by the IOM, under our intended approach, States are permitted to select a single benchmark to serve as the standard for qualified health plans inside the Exchange operating in their State and plans offered in the individual and small group markets in their State. To determine enrollment in plans for specifying the benchmark options, we intend to propose to use enrollment data from the first quarter two years prior to the coverage year and that States select a benchmark in the third quarter two years prior to the coverage year. For example, enrollment data from HealthCare.gov for the first quarter of calendar year 2012 could be used to determine which plans would be potential benchmarks for State selection and the benchmark plan specified during the third quarter of 2012 for coverage year 2014. If a State does not exercise the option to select a benchmark health plan, we intend to propose that the default benchmark plan for that State would be the largest plan by enrollment in the largest product in the State’s small group market.
Related articles
Health Care Law Will Let States Tailor Benefits – New York Times (nytimes.com)
Essential Benefits — Who Decides? – Huffington Post (huffingtonpost.com)
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