Updating the Essential Health Benefit Benchmark Plan: An Unexpected Path to Fill Coverage Gaps?
Sabrina Corlette, Georgetown Center on Health Insurance Reforms and Joel Ario, Manatt Health
On August 28, 2020, the U.S. Department of Health & Human Services (HHS) approved new essential health benefit (EHB) benchmark plans for Michigan, New Mexico, and Oregon, bringing to five (with Illinois and South Dakota) the number of states that have revised their benchmarks in recent years. Although many stakeholders were concerned that new rules for EHB benchmark selection adopted in the 2019 Notice of Benefit and Payment Parameters (NBPP) would result in less generous benefits, these five states have modestly enhanced their benefit packages to address perceived gaps in coverage.
Moreover, these states have added benefits without triggering the Affordable Care Act (ACA) provision requiring states to defray any additional premium costs associated with new mandated benefits. That requirement would have applied if these states had added new benefits through legislative or regulatory action “separate from an EHB-benchmark plan selection process.” In effect, the new benchmark selection process has created a safe harbor for expanding benefits, albeit within the limited parameters of the 2019 NBPP.
Essential Health Benefits: Statutory and Regulatory Background
The ACA requires insurers in the individual and small-group markets to cover a minimum set of ten essential health benefits. The scope of the benefit package must be equal to that provided under a “typical” employer plan, and must take into account the health care needs of diverse segments of the population, including women, children, and persons with disabilities. The law further requires the HHS to “periodically review” the EHB package and update it to “address any gaps in access to coverage or changes in the evidence base.”
Under the previous administration, HHS largely delegated this responsibility to the states, but also required states to honor the statutory requirement that EHBs be equal to those in a typical employer plan. At the time, the typical individual market plan was significantly less generous than the typical group plan, so HHS required each state to select an existing health plan from one of 10 different group plan options to serve as a “benchmark” plan. These 10 options include:
- The largest three small-group plans available in the state;
- The largest three state employee health plans;
- The three largest national Federal Employees Health Benefits Program plan options; or
- The state’s largest commercial HMO.
The specific items and services covered under that benchmark plan would constitute the EHB in that state, although in practice many states had to supplement or adjust their benchmark to ensure coverage of all ten statutorily prescribed benefit categories, particularly for pediatric oral and vision and habilitative benefits.
While the requirement that ACA benefits mirror group benefits was designed to improve the comprehensiveness of individual market plans, the ACA included another provision to deter states from adding new benefits by requiring that they pay any additional premium cost associated with any state benefit mandate enacted after December 31, 2011. This provision did not have any impact at first since the first benchmarks were state plans in existence before the 2011 deadline, and the Obama Administration did not require any state to defray costs as benchmarks were updated. Beginning in 2021, however, HHS has put states on notice that the agency will be looking more closely, with states required to submit reports annually listing any benefit mandates that exceed EHB.
In the 2019 NBPP, the federal Administration loosened the rules governing updates to the EHB package. Specifically, the rules gave states three new options for selecting a benchmark plan:
- Select a benchmark plan used by another state during the 2017 plan year;
- Replace one or more categories of EHBs with the same category or categories of EHB used in another state for the 2017 plan year; or
- Otherwise select a set of benefits to constitute the State’s benchmark plan.
In addition, state benchmark selections must pass two tests. First, the statute requires that the scope of benefits be equal to those in a “typical” employer plan. Second, the 2019 NBPP states that the benchmark plan cannot “exceed the generosity” of either the benchmark plan for plan year 2017 or any of the 10 benchmark plan options the state had available for 2017. In effect, the former requirement sets a floor for the generosity of the EHB package (though the floor is potentially lower than before because states can look to employer plans in other states if they find the employer plans in their own state to be too generous). The latter requirement sets the ceiling; it only allows a state to increase the value of its EHB if the current benchmark is not the most generous of the 10 in-state options. The 2019 NBPP also allowed states to permit insurers to substitute actuarially equivalent items and services across the different benefit categories (excepting pharmacy benefits).
Most commentators on the 2019 NBPP thought the new rules tilted the playing field toward less generous EHBs. That may indeed be the long-term impact, especially since states can go outside the benefit norms in their own state to find a less generous employer plan from another state. Conversely, a state cannot look to other states to find a more generous benchmark; each state is limited to the generosity of in-state plans. Nevertheless, there are now five states that have used the new process and every one of them has used it to increase benefits.
States are Using New EHB Flexibility to Fill Gaps in their Benchmark Plans
Of these five states, four (Illinois, Michigan, New Mexico, and Oregon) have used the new process for updating the EHB benchmark plan to enhance coverage of treatments for substance use disorders (SUDs) and/or to encourage the use of non-opioid pain treatments. This is not surprising given the rising death count from SUDs, and the medical consensus that two effective responses are to decrease barriers to medication assisted treatment (MAT) and increase access to naloxone to reverse overdoses.
The state benefit expansions have not been limited to treatment for SUDs. South Dakota, after an analysis of gaps in its benchmark plan, expanded coverage of treatments for Autism Spectrum Disorder (ASD), while New Mexico’s gap analysis led the state to end coverage limits on prosthetics, expand coverage of testing for heart disease, and increase eligibility for weight loss treatment. See table below. No state has yet permitted its insurers to substitute benefits across the EHB benefit categories.
State Changes to the Essential Health Benefits Benchmark Plan, for Plan Years 2020-2022
To achieve federal approval of their new state benchmark plan, each state was required to demonstrate, through an actuarial analysis:
- that the plan is at least equal in scope to the typical employer plan and
- that it does not exceed the generosity of the most generous plan among the comparison set of 10 benchmark plan options for 2017.
The states must also provide an opportunity for public comment on their proposed changes to the benchmark plan.
Because all five states added to their base-benchmark plan, which was itself one of the group market benchmark options, they automatically satisfied the first test. For the second test, Illinois’ actuaries determined that the five changes to the benchmark plan would not have a “material” impact on the premium. Actuaries for South Dakota, Michigan, New Mexico and Oregon concluded that while the new benefits would add to the benchmark plan’s value, it would still not exceed the generosity of the most generous of the state’s 10 benchmark plans. It is worth noting that this will only work for states that do not already use the most generous of their 10 benchmark options, and benefit enhancements will generally be relatively limited since differences in actuarial value between benchmark options tend to be small.
Since 2012, many states have been cautious about subjecting plans to new benefit mandates, out of concern that they will need to defray the additional cost. State bills to add new mandates have often either exempted ACA-regulated plans completely or included provisions sun-setting the mandate if it triggers a defrayal obligation. Yet Illinois, Michigan, New Mexico, Oregon, and South Dakota have successfully added new benefits to their EHB benchmark plans without being required to pick up the cost.
They did so by following the federally-prescribed pathway for updating the EHBs and demonstrating, through actuarial analyses, that the overall value of the new benchmark plan would not exceed the generosity of the most generous benchmark option in their state. Although many patient and consumer advocates feared the 2019 NBPP would result in less generous coverage, so far, the opposite has occurred. And federal regulators have not only approved these enhanced benchmark plans, but have explicitly informed states that those who follow the EHB update pathway will not trigger any defrayal obligation. The deadline for submitting a proposed EHB benchmark plan for plan year 2023 will be on May 7, 2021. Although many months away, states interested in improving their EHB benchmark plan to fill gaps in consumers’ access to services or to reflect changes in medical evidence may want to begin the necessary analyses soon.
The authors thank JoAnn Volk and Justin Giovannelli for their thoughtful review and comments on this post.