Background

The Affordable Care Act (ACA) requires all non-grandfathered individual and small-group qualified health plans (QHPs) to cover a core set of healthcare services within 10 Essential Health Benefits (EHBs) categories. States were given several options from which to choose to define the EHB benchmark in the state. However, states also have benefit mandates that may be in addition to the benchmarks or fall outside the 10 categories.

Congress was concerned that individual and small-group federal premium subsidies could insulate states from premium pressure and incent them to choose expansive EHB benchmark plans or to continue to add new benefit requirements. This approach could lead to increased premiums and federal spending. To avoid that possibility, the ACA required states to defray the actuarial cost of any new state-mandated benefits added after 2011 and make payments to either issuers or beneficiaries to negate increased premiums. A state was not required to defray the premium impacts when new benefits were added to comply with federal law or regulations.

Under current policy, the state has full control in reviewing and determining when a new coverage mandate should trigger a defrayal payment. However, no state to date has determined that a defrayal is required.

New Mandate Reporting Requirements

The CMS is concerned that states may not be accurately making defrayal decisions. While the CMS has oversight on this issue, there is limited insight into state decision-making related to defrayals. In the NBPP for the 2021 plan year, therefore, CMS has proposed requiring transparency related to existing mandates and annual reporting related to any new state benefit mandates.

Beginning July 1, 2021, the regulation would require states to:

1. Review all the state’s existing mandated benefits and determine whether the benefit was required before 2011, if it was added after 2011 to comply with federal law, or if it is not a new benefit but a revision to an existing mandate
2. Make a defrayal decision or share the state’s previous defrayal decision related to any existing mandate based on the assessment above
3. Share the list of all mandates and defrayal decisions with the CMS for its review; if a state does not submit the report to CMS, the agency will conduct its own evaluation and implement its own defrayal decisions.
4. Prospectively make defrayals where required
5. Annually share a list of new benefits and defrayal decisions with CMS

Implications

The proposed new state reporting requirements and increased CMS oversight could negatively affect the generosity of state benefit mandates and benchmark plan selections. States may reconsider the market application of current benefit mandates (potentiality removing them from the individual or small group markets where a defrayal would be required) or be discouraged from adding new benefit mandates over concern of defrayal requirements. The new oversight may also lead states to reconsider their EHB benchmark plans and may influence states to select less generous benchmark plans over concerns around defrayal—including less generous plans from other states. This could lead to a long-term race to the bottom in coverage requirements in a number of states. Since self-funded plans also rely on EHB benchmark options to guide where and how EHB requirements might apply to their plans, these changes could influence coverage throughout the commercial market and could lead to patient access concerns in some treatment areas.

The potential changes could also make it harder for patients, patient groups, manufacturers, providers, and other interested parties to advocate for states to add new benefits to protect certain populations.

To learn more about what state benefits or kinds of benefits could be most at risk based on these changes and about how we can inform your advocacy efforts, connect with us.

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