SummaryThe Affordable Care Act (ACA) requires health plans in the individual and small group markets-both inside and outside exchanges-to offer essential health benefits (EHB).
For 2014 and 2015, the Department of Health and Human Services (HHS) implemented what it indicated would be a transitional, state-driven approach to EHB. As stakeholders prepare for future EHB policymaking in advance of the 2016 plan year, Avalere Health offers the following insights for consideration.
• Any EHB rulemaking will struggle to balance patient protections with affordability. As implementation of the ACA evolves, HHS will continue to encounter the inherent tension between protecting consumers and ensuring affordable, sustainable premiums. While EHB rulemaking offers the opportunity for HHS to strengthen consumer protections under the law, the agency will likely be mindful that new requirements and/or reduced flexibility for health plans could lead to higher premiums over time.
• Rulemaking proposing significant changes to EHB for the 2016 plan year would likely need to emerge before the end of 2014. According to existing guidance, the current approach to EHB will likely be revisited in advance of the 2016 plan year. With the plan submission process for 2016 slated to begin in mid-2015, any rulemaking related to EHB would likely need to begin in the coming months. The longer the Administration is silent on plans for EHB, the more likely it seems that any rulemaking will not include significant revisions to current policy or that HHS will forgo EHB changes for the foreseeable future.
• The debate over EHB is highly political. Issues associated with affordability and a patchwork of state benefit mandates make consideration of EHB politically challenging. Given the current climate, it seems unlikely any guidance proposing significant, controversial changes will be released before the 2014 mid-terms. In addition, both political parties will turn to the 2016 presidential race almost immediately following this election cycle. Expect the Obama Administration to make both a political and operational calculation in its approach to EHB reforms, with any future guidance remaining in effect until at least after the next presidential election.
• Limited market experience makes wholesale reforms to current EHB policy unlikely. HHS has limited experience from the 2014 market to inform any significant changes to EHB in the near term. Since nearly half of enrollees did not start receiving benefits until May of 2014, HHS has very little information about how current EHB rules are affecting patient experience. Likewise, 2016 will be the first plan year for which issuers will have a full year of claims experience on which to base their premiums. A change in the EHB requirements at the same time would limit the utility of those claims data for rate setting and possibly delay desired market stability. As a result, it is most likely that any rulemaking for 2016 will extend current policy and/or consider a number of critical, yet incremental changes.
• The current approach relies on plan benchmarks from 2012. Current EHB requirements are based on a state-selected (or default) EHB benchmark from among specified plans offered in the state during 2012. In most states, EHB includes state-mandated benefits that were enacted on or before December 31, 2011, without any requirement for the state to defray the costs of these benefits. Though the current approach to EHB was intended to be transitional, changes to update EHB-as plan designs from 2012 may be viewed as “out-of-date”-will be interesting to watch. In particular, state politics could make any effort by HHS to revisit states’ obligations to defray the cost of benefit mandates challenging.
• HHS could clarify a number of important policy issues related to EHB. While limited data is available related to current exchange experience, a number of issues have emerged that appear ripe for potential EHB rulemaking or regulatory clarification. In particular, look for HHS to consider additional guidance surrounding network adequacy, the definition of discrimination when evaluating benefit design, and the drug counting methodology, particularly for medications accessed at a physician’s office.
• Annual guidance for health plans offered on the federal exchange provides a vehicle to dictate policy in the majority of states. In the most recent Letter to Issuers, HHS took steps to address benefit transparency, including requirements around formulary and provider network specifications. While the annual Letter to Issuers does not offer binding instructions for state-based exchanges, it could be a guide for state-based exchanges to adopt similar requirements for their participating plans.