A.M. Best recently interviewed Bob Cosway about the challenges of defining essential health benefits (EHB) in each state. Under the Patient Protection and Affordable Care Act, insurers must provide plans that include these EHBs when marketing to the state health exchanges.
A transcript of the audiocast can be read below.
Q: The healthcare reform law introduced something called essential health benefits, or categories of healthcare services that plans operating in the state health insurance exchanges must cover when the exchanges come online on January 1, 2014. Under the law, states worked to define essential health benefits during last year’s third quarter. What benefits must be offered?
A: Well, they’re intended to be the benefits that any appropriate health plan should cover. The law and an Institute of Medicine study that was done based on the law pointed to the benefits that are typically covered in a current employer-provided health plan, as one meaningful approach to deciding what’s essential. The law also described 10 broad categories of healthcare services that the law deemed to be essential, for example emergency services, hospitalization, maternity, mental health, things like that.
The other ones that are in the law…are prescription drugs, laboratory services, rehabilitative and habilitative services, preventive and wellness and, finally, pediatric services, including oral and vision care. It turns out that most of those services, maybe 95% to 98% of those services, are already covered in most employer-sponsored plans.
The other service that’s in this top 10 list that was not routinely covered is habilitative services, which is a new term to many of us in the industry. Rehabilitative services have always been covered. Those are services designed to help restore a lost function whereas habilitative services are services to help someone maintain a function that they would otherwise lose.
Q: Is there a wide variation from state to state on essential health benefits?
A: Actually, in most respects they’re very similar. Probably 95% to 98% of every state’s essential health benefit covers the same services.
Every state has the opportunity to, through their own state legislature, require health plans in that state to cover certain services. That turns out to have been the main driver in determining what each state’s essential benefits are.
The article we wrote looks at six services that aren’t universally covered but have usually a material cost impact.
Those were artificial reproductive therapy, acupuncture, applied behavior therapy for autism, chiropractic, adult hearing aids, and physical and occupational therapy. It turns out that whether a state covers those services in their essential health benefit in large part depends on whether or not they were already mandated.
While it’s not a huge cost, because artificial reproductive technology has a large cost whenever it’s used, that’s an example of one that carriers are often looking at. It turns out that artificial reproductive technology is essential only in a couple states in the north Midwest, Montana and North Dakota, and in most of New England it’s essential, because it has been mandated. But in most of the rest of the country, it is not essential.
Because it also is very expensive, treatment of autism is increasingly in the news, and [the question] is whether a therapy called applied behavioral therapy for autism is covered or not. In that case, about half of the states currently mandate it, so in those states it will be deemed to be essential and in the other states it’s likely that it will not be deemed to be essential.
Q: Are any essential health benefits of major financial impact to insurers?
A: In terms of the ones that the law itself required, the dental, vision, and habilitative, no. They’re all important services but they aren’t very large in terms of a percentage effect on the premium. The other aspect of essential health benefits was that the federal government decided to let each state decide what was essential but they put some rules around it. They defined for each state 10 benchmark plans that state could choose from.
Those 10 plans were defined as three federal plans for federal employees. Those three were the same for every state. The other seven that a state could choose were specific to that state. There were three plans covering the state employee group. There were three small group plans. And then they could choose the largest HMO in their state.
That’s where some of the cost differential came in. What states did was they looked at those 10 possible benchmarks that they could choose to define their essential health benefits and had to do some analysis as to which of them they thought was the most appropriate for their state. One consideration was the cost of the services in that particular plan.
Q: So right now, what is the status as of mid-February on the states’ and/or federal efforts on defining these essential benefits in the different states?
A: The latest that I’ve seen is from a December Kaiser Family Foundation document where everyone had to make their decision in December or the federal government would assign a default plan.
As of December, about 19 states chose one of the small group plans that already existed in their state. Three chose a state employee plan. Four chose the largest HMO in that state, and the remaining 24 had not made a decision. The default in the law was the largest of the three small group benchmark plans. The takeaway there is that by now, essential health benefits have been defined in every state, whether chosen by the state or the federal government assigning a default plan.
A.M. Best’s also cites Bob in this article (subscription required) discussing expanded EHBs. Here is an excerpt:
While most essential health benefits mandated by reform were already covered in employer-sponsored plans, Bob Cosway, principal and consulting actuary with Milliman, told Best’s News Service recently a handful of services that usually aren’t [covered] will have a material cost impact to carriers. Those include applied behavioral therapy for autism, artificial reproductive therapy, acupuncture, chiropractic, adult hearing aids, and physical and occupational therapy. It turns out that whether a state covers those services in their essential health benefit in large part depends on whether or not they were already mandated, Cosway said.
For more perspective, read Bob’s new paper reviewing variation in EHBs from state to state.