State Choices on Essential Benefits May Become More Complicated

by David Gorn, California Healthline Sacramento Bureau

It has been called a health care candy store.

In 2011, the California Legislature approved separate measures requiring health plans operating in the state to cover maternity care and behavioral therapy for children with autism or other developmental disabilities.

Besides California, 21 other states approved laws in 2011 mandating various health services to be covered by health plans, according to research by the National Conference of State Legislatures.

Now, this year, the queue of proposed mandates might be even longer in California, as advocates push for coverage and health officials lay the groundwork for implementing the Affordable Care Act.

As Republican Assembly member Dan Logue (Linda) put it: "We look at health care as a candy store, and we want one of everything."

Late in January, the Assembly approved AB 154, which would require insurers to cover addiction treatment and mental health services.

Sen. Charles Calderon (D-Montebello) explained his vote in favor of the bill: "We are now about to go into negotiations with insurers [over which benefits will be required] in the exchange, and substance abuse and depression should be in that conversation. ... We need to get it done now."

California lawmakers this year have passed or are considering other mandates for coverage, including autism treatment and oral chemotherapy.

Defining Essential Health Benefits

The newest coverage mandates coincide with the HHS' release of an "informal bulletin" in December 2011 to address the definition of "essential health benefits."

To operate in state-based health insurance exchanges that will be launched in 2014 under ACA, insurers must offer coverage for 10 categories of health services. The HHS bulletin -- released as an "intended regulatory approach" -- gives states the authority to determine essential health benefits within a benchmark framework.

HHS has outlined four categories from which states can choose a benchmark health plan:

  • One of the three largest small group plans in the state by enrollment;
  • One of the three largest state employee health plans by enrollment;
  • One of the three largest federal employee health plan options by enrollment; and
  • The largest HMO plan offered in the state's commercial market by enrollment. 

The health care services covered by a state's chosen benchmark plan would set the standard for "essential health benefits" in that state.

The default benchmark for states that do not choose a plan will be the small group plan with the highest enrollment in the state.

Stakeholders and other interested parties were able to submit comments on the bulletin to HHS through Jan. 31. Speaking at a conference Tuesday in Sacramento, Rick Kronick, HHS deputy assistant secretary for health policy, said the department has received a raft of questions about the practical matters of defining essential benefits.

Complication No. 1: More and More Benefits

One such lingering question involves the interplay between existing state-mandated health coverage and the 10 categories of essential health benefits coverage.

Rhode Island Health Insurance Commissioner Chris Koller told participants at a Commonwealth Fund/Alliance for Health Reform conference last week in Washington, D.C., that he expects states will choose the largest small group plan as their benchmark. Such plans generally already cover state-mandated benefits, he said.

Here's the rub: States could eventually find themselves on the hook for those coverage mandates. Beginning in 2016, ACA requires states to cover the cost of benefits that fall outside of the 10 coverage categories for any individual enrolled in a health plan offered through the exchanges. Those benefits could include existing state-mandated health care services. From 2014 through 2015, the federal government assumes the costs.

Writing HHS Secretary Kathleen Sebelius in response to the essential health benefits bulletin, California health officials posed a question about state mandates. Signing the letter were Department of Health Care Services Director Toby Douglas, Insurance Commissioner Dave Jones, Department of Managed Health Care Director Brent Barnhart, California Health Benefit Exchange Executive Director Peter Lee and Managed Risk Medical Insurance Board Executive Director Janette Casillas.

Noting that the HHS bulletin implies that none of plans in the benchmark categories would cover all state mandates, the California officials asked the secretary to clarify whether this means that a state cannot add mandates to its chosen benchmark plan and still have the federal government assume responsibility for the cost of those benefits until 2016.

The officials also pointed out that in California, coverage mandates do not apply equally to all types of health insurers. According to the letter, "HMOs and some PPOs must cover medically necessary basic health services (as defined by state law) while the same requirement does not apply to the remaining PPO and health insurance products. Given this fundamental difference, and two separate controlling bodies of law, over time, different mandated benefit requirements have been applied to different product types."

The letter also states that officials are reviewing 10 potential benchmark plans, which "all provide a comprehensive benefit level with relatively little variability in the type of benefits offered."

California is working with the consulting firm Millman to evaluate the benchmark options, the letter says.

Complication No. 2: Exchange Board Gets Political

The normally apolitical California Health Benefit Exchange Board dipped its toes into the political world last year, when it helped scuttle a bill on insurance rate regulation. It also acted to delay laws on setting up a Basic Health Program in the state. The exchange board staff also got involved in a number of other bills related to the exchange, dealing with eligibility and enrollment, for instance, or required notification of coverage options.

According to Sumi Sousa -- who helped write the legislation creating the California exchange and now works for the San Francisco Health Plan -- one of the dangers the exchange faces is the political scrum that could start as health advocates push for a specific medical condition to be covered.

"The one thing we risk is if the exchange can't get its core functions done," Sousa said. "If we cannot walk, then we can't get started. That's the central legislative challenge."

It's a tough call, Sousa said, for health care advocates to hold off on pushing their agenda. An advocate's sole job is, well, to advocate.

"We all want so much to do everything we can, include as much as we can into the exchange," Sousa said. "The challenge for the exchange is to step back, to be a little insulated from the rough and tumble of the Legislature."

Ironically, to be insulated from all of that legislative jiggering, the exchange may actually need to get more involved in political affairs.

Or, in the case of the California exchange, it may need to take just a couple of steps into the political ring and land a couple of warning smacks on the nose, so it can get back to work in its own corner of the world.

Here's a look at what else is happening in health reform.

Administration Actions

  • Last week, the Obama administration defended its decision on a religious exemption to new rules under the federal health reform law that requires health plans to cover them without copayments or deductibles (Alonso-Zaldivar, AP/San Francisco Chronicle, 2/2). The officials added that they would not cave to pressure to expand the exemptions (Radnofsky, "Washington Wire," Wall Street Journal, 2/2). They were responding House Speaker John Boehner (R-Ohio) criticism of the coverage provisions, which he said are unconstitutional (Baker, "Healthwatch," The Hill, 2/2).

Eye on the Courts

  • With the U.S. Supreme Court hearings on the federal health reform law less than two months away, the court has offered no indication that it will allow a live broadcast of the proceedings. Lawmakers and media outlets have pressed the court to allow live audio or video access to the oral arguments in late March. However, legal observers say the court is unlikely to reverse its long-standing ban on recording equipment in the courtroom. Some experts note that the justices might allow the release of an audio recording one week after the hearings (Stern, Bloomberg, 2/5).

On the Hill

  • Last week, Sen. Mary Landrieu (D-La.) introduced bipartisan legislation (S 2068) that would exempt insurance agents and broker commissions from the medical-loss ratio calculation mandated by the federal health reform law. The bill's co-sponsors are Sens. Johnny Isakson (R-Ga.), Lisa Murkowski (R-Alaska) and Ben Nelson (D-Neb.) (CQ HealthBeat, 2/3).
  • In a letter to HHS Secretary Kathleen Sebelius on Monday, House Democrats said that HHS' decision to grant states the authority to determine "essential health benefits" in the insurance exchanges would give insurers more power. They added that allowing states to make their selections of the benefits across 10 categories would "undermine" the objectives of the federal health reform law because it would enable insurers "to continue avoiding sicker individuals rather than competing on quality and efficiency" (Pecquet, "Healthwatch," The Hill, 2/6).
  • As Republicans develop their agenda for the next year, leaders are abandoning many large-scale plans -- such as repealing and replacing the federal health reform law -- and instead plan to make incremental changes. The effort is an attempt to address declining poll numbers and the view that the GOP is "combative" (Steinhauer/Weisman, New York Times, 2/2).

Rolling Out Reform


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