Letting states pick essential health benefits may ‘undermine’ ACA

Insurers, hospitals and regulators had a largely negative reaction to a major provision of the proposed Affordable Care Act (ACA) benefit parameters for 2019 that would allow states to define their own “essential health benefits” which ACA-compliant insurance plans have to cover, saying it may return the nongroup market to its pre-ACA state.

More than 300 comments were submitted on the proposed rule despite the shortened comment period, which lasted 25 days. The proposal emphasized state “flexibility” on ACA requirements like the 10 essential health benefits (EHBs), adjusting the law’s medical-loss ratio and having state regulators take a larger role in certifying qualifying health plans.

What drew the most attention were the changes to benefits. Under the proposed rule, states would have more power to define their benchmark plan beginning in 2019, including choosing that of another state or from a set of benefits which includes all 10 currently included categories and matches a “typical” employer plan which covers at least 5,000 enrollees, rather than being in equal in scope to the most popular employer plans.

The American Hospital Association and the Federation of American Hospitals (FAH) both asked CMS to abandon these changes, arguing that while reducing the benefit package may lower insurance premiums, reducing benefits could make individual market plans only affordable to healthier customers—a problem that plagued the market before the ACA was implemented.

“The FAH is concerned that these proposed rules would introduce the ability and the incentives for states so inclined to annually chip away at essential benefits,” the group wrote. “They could result in significant coverage loss perhaps resulting in more limited prescription drug formularies, fewer days of hospital coverage, less expensive treatment options for chronic illnesses or fewer rehabilitative visits. Coverage losses are bad for enrollees as well as providers whose provision of uncompensated care and bad debt could escalate.”

Some insurers, such as Aetna, supported the benefits provisions while asking CMS to postpone any changes until 2020. Nearly all took issue with allowing states to change their EHB benchmark plan annually, while others, like America’s Health Insurance Plans, said the options CMS proposed would confuse customers and create greater administrative costs for carriers.

Other stakeholders were concerned about the impact these changes could have on specific services which are currently covered by ACA-compliant plans. Kaiser Permanente pointed out that maternity care was commonly excluded from pre-ACA individual market coverage and insurers may decide to do so again.

“In the absence of a meaningful maternity mandate, actuarial math could lead issuers to conclude that the prevalence and cost of coverage for maternity services that are planned about half the time, make coverage of such services economically inviable,” Kaiser wrote in its comments, noting plans may also go back to excluding substance abuse or behavioral health benefits.

Physician groups focused on ways states and insurers could potentially limit benefits. The American Medical Association (AMA) strongly opposed the provision to allow substitution across EHB categories, arguing it would make benefit design complicated for customers to compare.

The American Academy of Family Physicians (AAFP) said allowing self-insured employer plan in any state to meet the standard of a “typical” employer plan means states could base benefits on a single “outlier” insurance package with narrow coverage found anywhere in the U.S.—which insurers could then use as a basis to avoid the costliest services.

“While ratcheting down EHBs may reduce upfront premium costs, it could have devastating financial implications for families with the sickest patients whose insurance coverage may not cover medically necessary services,” AAFP wrote in its comments.

Much of the work on determining these benchmarks would fall on state insurance agencies. Several which commented were opposed to the changes for similar reasons as healthcare groups, with Washington Insurance Commissioner Mike Kreidler saying it could result in a “race to the bottom” in EHB benchmarks.

One department, the Maine Bureau of Insurance, brought up a more logistical concern: Whether states can handle all the additional responsibilities the rule proposed to move from CMS to their agencies, like performing compliance reviews of insurance plans. The deputy superintendent of the bureau, Timothy Schott, said the two staff members it has for such reviews couldn’t feasibly take over those duties.

“If required to perform these reviews, the bureau would likely be required to hire outside contractors for this work, which would greatly increase the expense to the insurers being reviewed, which may be passed to consumers in higher premiums,” Schott wrote.