The end of new state benefit mandates?

Discussion in 'Healthcare/Insurance/Govt Healthcare' started by Greenbeard, Feb 18, 2012.

  1. Greenbeard

    Greenbeard Gold Member

    Jun 20, 2010
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    New England
    Under the ACA, starting in 2014 health insurance plans in the individual/exchange and small group (though not the large group or self-insured) markets will be required to offer at least a minimum set of benefits, the essential benefits package. The statute has some very general language about general benefit categories it should include, but generally leaves it to HHS to figure out what that package looks like.

    Back in December, HHS indicated it wouldn't be coming up with a national benefit package but instead would opt for some state flexibility and at least initially prefers benefits packages that reflect current state markets. That decision gained HHS praise in some corners (from those who think state flexibility is the way to go) and criticism in others (from those who think state-by-state variations in minimum standards breeds inequities that the ACA ought to smooth out). See these recent dueling NEJM perspectives if you're interested in that debate: "Fair Enough? Inviting Inequities in State Health Benefits" vs "The Value of Federalism in Defining Essential Health Benefits".

    As it is, for at least the first two years of this (HHS signaled its intention to evaluate the success of this approach and tweak as necessary for calendar year 2016), HHS is proposing that states will choose what their own essential health benefits package will look like from a slate of four options (technically it's 10 different choices but conceptually it groups into four categories):

    1. The most popular--i.e. one with the most enrollees--insurance plan in the state's small group market. There are three variations on this theme so there actually three options here for states.
    2. Any of the three most popular state employee health benefit plans
    3. Any of the three most popular Federal Employees Health Benefit Plans. This is the only option that isn't pegged to current conditions within the state's borders.
    4. The most popular HMO in the state

    This remains a work in progress, as now states and other stakeholders get to weigh in their thoughts on this proposal.

    The interesting thing here, though, is that the ACA requires states to pay for additional mandated benefits beyond the essential health benefits. If they want additional benefits in insurance packages in the state, they can't expect the feds, the consumers, or the insurers to pick up the tab, the state itself will be required to do that. That is, they can no longer tack on benefit mandates and simply ask the market and the consumer to bear them, the state itself will have financial skin in the game when it's coming up with new benefit mandates.

    For instance, in FAQs on this subject released last week by HHS, they clarify that this applies to any future state benefit mandates coming down the pike:

    In other words, under the administration's current proposal there's now strong financial pressure on the state itself not to issue any additional benefit mandates because they'll now be on the hook for paying for them.

    Of course, there's the question of what happens to existing state benefit mandates. That depends. If a state opts for an essential health benefits package based on, say, the most popular plan currently being sold in its small group market, then that plan will presumably have any state benefit mandates for the small group market built it and the state won't be required to defray the costs of them. At least in 2014 and 2015.

    But as I've pointed out before, a conservative administration's HHS could toss out the state flexibility approach that, in its incrementalism, only marginally attacks the status quo. Instead, they could come up with a uniform national essential benefits package, but one carefully designed to be less generous, perhaps significantly so, than the average existing slate of mandated benefits in most states (all while taking care to hew closely to the minimum requirements in the statute, of course--this gets interesting because it hinges on how this hypothetical administration chooses to define a "typical" employer plan).

    At that point, many states--particularly those with the largest number of mandated benefits--would find themselves on the hook for financing the benefits they're mandating in excess of the national essential health benefits. That's a very strong incentive to start paring back some or all of those benefit mandates.

    That is, if a conservative HHS was devious enough to want to use the ACA to pursue its own health policy preferences.
    Last edited: Feb 18, 2012

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