New CMS Final Rule Gives States Increased Flexibility to Define Essential Health Benefits Despite Disapproval from Patient Advocacy Groups

Citing the desire to permit insurers to offer more affordable health plans, CMS is providing states many new options for selecting the set of benefits for each state’s EHB-benchmark plan. State EHB-benchmark plans impact plan coverage requirements, including annual and lifetime dollar limits, for many types of health plans.

In CMS's press release on the rule, CMS Administrator Seema Verma noted the increasing costs of premiums and fewer insurance plan options available. According to Verma, “this rule gives states new tools to stabilize their health insurance markets and empower citizens to find coverage that fits their families’ needs and budgets.”

But patient advocacy groups have expressed concern that these changes will weaken the EHB benchmark standard and ultimately reduce coverage for sick people who require medical services. For example, the American Cancer Society – Cancer Action Network expressed concern that the changes “will encourage states to adopt EHB-benchmark plans that are less generous than those currently offered to consumers” and that “consumers may find that services that were previously covered under their plan are no longer covered.” Similarly, the American Association of Retired Persons (AARP) disapproved of the EHB-benchmark plan changes. In its comments to the proposed changes, AARP cited concerns that the changes will “undermine the value and adequacy of coverage in the individual market” and that individuals “who purchase coverage through the Exchange could lose comprehensive benefits currently available.”

Below is a brief explanation of EHBs under the ACA and the changes enacted by the final rule.

What are Essential Health Benefits?

Under the Affordable Care Act (ACA), small group health plans and individual health plans issued by insurers must cover EHBs and cannot apply lifetime or annual dollar limits on EHBs. Large group health plans, self-insured group health plans, and grandfathered health plans are not required to cover EHBs, but, if they do, they cannot impose lifetime or annual dollar limits on EHBs they chose to cover.

The ACA defines EHBs by referencing a list of ten categories of items and services that constitute EHBs. The ten categories of EHBs are:

1. Ambulatory patient services;
2. Emergency services;
3. Hospitalization;
4. Maternity and newborn care;
5. Mental health and substance use disorder services, including behavioral health treatment;
6. Prescription drugs;
7. Rehabilitative and habilitative services and devices;
8. Laboratory services;
9. Preventive and wellness services and chronic disease management; and
10. Pediatric services, including oral and vision care.

The ACA requires states to identify a benchmark plan that covers all ten categories, and health plans in each state must define EHBs in a manner consistent with the state EHB-benchmark plan. CMS publishes  the EHB benchmark plans for each state online. Small group health plans and individual health plans are required to provide benefits that are substantially equal to the EHB-benchmark plan, including covered benefits and limitations on coverage such as amount, duration, and scope.

Increased State Flexibility to Select EHB-Benchmark Plans

Previously, states had ten options when selecting an EHB-benchmark plan. These options included the largest health plans by enrollment in small group insurance products, state employee health plan options, Federal Employees Health Benefits Program options, and commercial non-Medicaid HMOs in the state.

But under the new final rule, states will now have considerably more options for selecting an EHB-benchmark plan for the 2020 plan year. First, they may select any of the 50 EHB-benchmark plans used by other states or the District of Columbia for the 2017 plan year. These plans are all currently listed on the CMS website. States may also replace the benefits in one or more of its EHB categories with any of the other state EHB-benchmark plans’ benefits in the same category. And, in the most flexible option, states have the freedom to otherwise select a set of benefits that would become the state EHB-benchmark plan, provided other requirements for EHB-benchmark plans are met. For all three options, states may not select a state EHB-benchmark plan that is more generous than the most generous plan that was available as an option for the 2017 plan year.

Many commenters argued that the new EHB rule would result in states selecting EHB-benchmark plans with fewer benefits and less coverage. CMS disagreed with commentators’ concerns that the new options will create “a race to the bottom” among states’ scope of benefits for EHB-benchmark plans. CMS concluded that states will not be allowed to substantially reduce the level of coverage, because EHB-benchmark plans still must include coverage of all ten EHB categories and provide a scope of benefits that is equal to or greater than that of the state’s typical employer plan. “Typical employer plan” is generally defined as either (1) one of the 10 options available for the 2017 plan year, or (2) the largest health insurance plan by enrollment within one of the five largest large group health insurance products in that state.

Implications for Health Care Providers

Providers, particularly ones that provide expensive treatment for persons with serious health conditions, should closely monitor states’ proposed EHB-benchmark plans for the 2020 plan year. The concern is that states could decide to adopt EHB-benchmark plans that exclude coverage for treatment of certain expensive chronic conditions, consequently giving a “green light” to small group health plans and individual insurers in the state to also exclude coverage. Providers will want to check whether states are proposing EHB-benchmark plans that exclude coverage for certain benefits relevant to their practice or business. States must provide a reasonable notice and comment period for selection of their EHB-benchmark plans and also must notify HHS of their selections, although the deadline to do so has yet to be determined. The final rule goes into effect on June 18, 2018.