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States get flexibility in newly proposed essential health benefit rules


The Department of Health & Human Services (HHS) put its imprint on essential health benefits (EHBs) on Nov. 20 with the release of a set of proposed rules that will determine required EHB components that must be offered beginning in 2014 through all non-grandfathered health plans.

The announcement was widely anticipated by the insurance industry as it eyes the advent of state health insurance exchanges and the need to design plans incorporating the EHBs by October 2013 for the open enrollment period.

HHS also released two other rules in conjunction with those for EHBs: a rule that prohibits insurance companies from discriminating against individuals with pre-existing or chronic conditions, and another pertaining to workplace wellness programs.

Notable in the EHB regulation is the flexibility it will provide the states. By adhering to EHB regulations, states will be allowed to base the minimum benefits on “benchmark plans” offered in the states. These plans are typically the largest small group commercial plan offered or the largest HMO, but could also include any of the three largest state employee benefit plans or any of the three largest federal employee benefit plans. If a state does not select its own benchmark, the federal government will use the largest small group commercial plan as the default.

The flexibility is a nod to both the states and the insurance industry, who worried that a single set of national standards applied to the 10 broad EHB categories would be unworkable and could lead to unnecessarily high premiums. The affordability of plans offered on the exchanges has also been a concern of many industry trade groups.

“It remains critically important that core benefits be affordable as well as obtainable,” said Neil Trautwein, vice president and employee benefits policy counsel with the National Retail Federation in a statement. “We appreciate the Administration’s outreach and general restraint in these proposed regulations. It is important that essential health benefits echo available market coverage today. More extensive but unaffordable coverage would help no one in the end.”

But consumer groups had pushed for a more uniform definition of the benefits across all the categories to be applied nationally.

“Ultimately, the goal is to establish a clear package of essential benefits,” Stephen Finan, senior director of policy, American Cancer Society/Cancer Action Network told Kaiser Health News. “Patients should have the same set of evidence-based benefits no matter where they live.”

If consumer groups didn’t get all they would have wanted out of the proposed regulations, neither did the insurance industry. Also included in the Nov. 20 announcement were proposed rules governing how much insurers can vary their rates based on such factors as age, where a person lives and tobacco usage. Tobacco users can be charged as much as 50 percent more than those who are tobacco-free, but the regulations allow for exemptions of tobacco users who are actively trying to quit.

The regulations also provided age-rating guidelines that restricted how much more insurance companies can charge older members than younger -- presumably healthier -- members while also breaking the age rating into one-year increments where insurers typically rate in five or 10 year segments.

“While additional flexibility on essential health benefits is a positive step, we remain concerned that many families and small businesses will be required to purchase coverage that is more costly than they have today,” said Karen Ignagni, president and CEO of America’s Health Insurance Plans, in a statement reacting to the proposed regulations. “It also is important to recognize that the new EHB requirements will coincide with the new restrictions in age rating rules that also go into effect on January 1, 2014. Both of these provisions may incentivize young, healthy people to wait to purchase insurance until they are sick or injured, driving up costs for everyone with insurance.”

A comment period on the pricing and EHB proposed regulations will be open until Dec. 26, with final regulations expected to be published in early 2013.
 

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