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Although 35 of the 50 states have yet to create the marketplaces known as health benefits exchanges required by the Affordable Care Act, they aren't completely ignoring the law's impending requirements. A majority, in fact, are moving forward on another key component of federal health reform: defining what will be included in the health coverage plans insurers will offer under the law.
According to consulting firm Avalere Health, 23 states and the District of Columbia met the U.S. Department of Health and Human Services' (HHS) Sept. 30 target date to identify benchmark health plans that define the essential health benefits (EHB) for all individual and small group policies the ACA requires. Analysis from the National Academy for State Health Policy indicates at least 10 more are still working on their EHB options, with several expected to soon submit their own plans. Three - Alabama, Louisiana and Tennessee - have opted to not choose an EHB plan. The EHB benchmark decisions are critical because that standard will determine how comprehensive those health plans will be and how much they will cost. The ACA requires states to adopt benchmark plans that include 10 coverage categories: preventative care, maternity and newborn services, pediatric services, mental health and substance abuse, prescription drugs, hospitalization, emergency care, out-patient care, laboratory services and rehabilitative care, including ongoing support or "habilitative" services. States can adopt a benchmark plan that doesn't itself meet all coverage categories, but they must then add whatever benefits they need to meet that standard. The plans they adopt will be good for two years, 2014 and 2015, after which states will choose their benchmark plan each year. While much of the media's attention has been centered on how insurance plans will operate within health care exchanges, each state's EHB benchmark also applies to policies sold outside the exchange system as well as to millions of newly-minted Medicaid enrollees who obtain coverage via the ACA (though state Medicaid agencies will actually select the plan they use). Exceptions include grandfathered individual and small market plans, self-insured and large company plans (those with 50 or more employees) and other specialty plans. "These standards impact the whole individual and small group market," says National Academy for State Health Policy (NASHP) program director Sonya Schwartz. "Each benchmark plan establishes a model policy that defines the benefits and services that are included in those health plans. That's important because if you need coverage for something that's not included in the benchmark, and your plan hasn't chosen to go beyond that, you're out of luck. You'll be paying for those services out of pocket." That fiscal hurt could also be applied to states. Under the ACA, if a state adopts benefits that exceed the federal requirements, it must cover those costs on its own. In that regard, however, states - and health insurers - have been working at a disadvantage: the federal government has yet to announce final EHB requirements. Last December 16, the U.S. Department of Health and Human Services issued a bulletin that offered states a glimpse at the agency's intended regulatory approach, if not hard and fast rules. According to that guidance, state EHB plans would have to include not only the 10 broad coverage categories, but also, among several things, "reflect typical employer health benefit plans," "account for diverse health needs across many populations" and balance "comprehensiveness and affordability" for those purchasing policies. Robert Zirkelbach, a spokesman for the health insurance trade association America's Health Insurance Plans, says that while such guidance is helpful, it does not replace the certainty that health insurers need to be able to have appropriate plans ready for the beginning of enrollment on Oct. 1, 2013. "It takes from 12 to 18 months for health insurers to develop a benefits package, get it approved and bring it to the marketplace," he says. "Our members need the certainty of knowing what the rules are going to be so they can get down to the business of developing benefits packages that are going to be attractive to consumers." Even without official standards, states were not totally in the dark. The HHS guidance made it clear that states could choose from myriad options: any one of the state's three largest small group plans, any of the three largest plans for state or federal employees, or the largest HMO for the state's commercial insurance market. NASHP's Schwartz says to date a majority of states that have chosen benchmarks have opted for small group plans, with Utah and Maryland choosing a state employee plan and Connecticut going with an HMO. Coverage varies state to state. California, Washington and Maryland, for instance, have adopted EHB plans that include acupuncture services. Oregon rejected a call to cover bariatric surgery to fight obesity, but did endorse cochlear implants for hearing-loss patients. Virginia and Michigan favor plans with chiropractic services; Oregon does not. Mental health offerings vary widely, and an analysis of eight of the proposed state EHB plans by Avalere Health found that all of them exceeded federal minimum requirements for prescription drug coverage, but by vastly different degrees. The California plan, for instance, covers only about 26 percent of those allowed by the ACA. Four states - Mississippi, Virginia, Vermont, and Washington - covered at least 85 percent of those drug options. Variations are to be expected, but state lawmakers and work groups responsible for making these decisions clearly appear to be leery of adding benefits that will later be deemed not acceptable for federal subsidies. That wariness was evident even in California, the first state to begin implementing the Affordable Care Act after it became law in March, 2010. In an August appearance at a National Conference of State Legislatures health reform seminar in Chicago, California Assemblyman Bill Monning (D), then the chair of the Assembly Health Committee, cited his state's perpetual budget deficits when noting that it was critical his colleagues "not include essential benefits that the federal government won't subsidize." Last week, Monning said that while several "individual mandate" bills - those requiring insurers to cover specific treatments or medications - were introduced, virtually all were tabled with the blessing of their authors. Lawmakers eventually chose a Kaiser small group plan that carries a broad spectrum of services, with no additional mandates to deal with. It was a decidedly rare moment of restraint in a state known for heavy-handed regulation, one Monning said was an indication of how serious lawmakers are about avoiding costly missteps in implementing the ACA. "It was a lot of hard work," he says, noting that much of that effort was in educating colleagues about the intricacies of the ACA and the health industry in general. "The learning curve has been tough for everyone, but particularly so for legislators," he says. "It has been even more so for those who don't specialize in health." Whether Monning and lawmakers across the country have guessed correctly won't be known for a while. Virtually nobody expects final regulations until after the elections in November. But Micah Weinberg, a senior policy analyst at the Bay Area Council, a San Francisco-based business group that supports the health reform law, believes those final rules will be in line with what states are already doing. "It isn't inconceivable that the federal government would issue rules drastically different than what states are expecting," he says. "But they have to know that would create enormous problems at this point." He also notes that the essential benefits question is only one of many yet to be answered, including if and how the law will make health insurance more affordable. He adds that many consumers don't yet realize that, even with federal subsidies, their insurance rates will likely increase under the ACA, not go down. "The coverage will be substantially more comprehensive, but it will cost more," he says. On that front, says AHIP's Zirkelbach, insurers are prodding federal officials to revisit such ACA tenets as the age rating band, which bars insurers from having variations in rates based on enrollees' age that vary by more than a 3-to-1 ratio. Most current age bands are a 5-to-1 ratio, which Zirkelbach says is a fair balance that prevents policies from becoming too costly for the younger enrollees necessary for the system to have any chance of working as intended. "For this to work, coverage has to be affordable," he says. Patrick Johnston, president and CEO of the California Association of Health Plans, also questions the impact of forcing insurers to adopt a 3-to-1 ratio, something he calls "a political conclusion, not an actuarial fact." He says he has heard talk of HHS phasing in the 3-to-1 age band over time, but without the final regulations it is, at this point, just talk. "To make the (Oct. 1, 2013) deadline, there has to be clarity on these cost drivers," he says. The myriad of enormous challenges is so far keeping enthusiasm in check among even the law's staunchest proponents. During a conference call last Monday with media and several high ranking California officials - including Monning, Sen. Ed Hernandez (D) and state Health and Human Services Secretary Diana Dooley - Daniel Zingale, vice president of the California Endowment, a health advocacy group, expressed great optimism over how California has proceeded with ACA implementation. But he also couched much of his enthusiasm with caution. "Nobody is declaring 'mission accomplished' on this yet," he said.
- By RICH EHISEN
This is the latest in SNCJ's ongoing coverage of states' implementation of the Affordable Care Act. We will continue to offer in-depth coverage of this issue throughout the foreseeable future.
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