Essential health benefits: Steps to a final definition (Part 2)

In the second of our posts discussing recent recommendations by the Institutes of Medicine (IOM) regarding the process HHS should use to define the essential health benefits (EHB) package, we’ll examine the proposed steps in the definition process HHS should undertake. (In “Essential Health Benefits: Balancing Coverage and Cost,”  IOM recommends that HHS should publish the initial EHB draft by May 1, 2012.)

First: follow the law. The starting point, says IOM, is to follow the statutory mandates regarding the EHB package. So, HHS must determine the scope of benefits and design provided under a typical small employer plan in today's market.

This scope of benefits must then be modified to ensure that the 10 general categories of benefits set forth in ACA Sec. 1302(b)(1) are included. (These categories include ambulatory patient services and hospitalization, as well as preventive and wellness services and mental health services.) Not every service that could be offered within those 10 categories should be defined as “essential.”

Second: Incorporate cost. Next, IOM recommends that the package developed in Step One be adjusted so that the cost is deemed to be affordable. What’s “affordable?”  Again, typical costs for small employers should be the focus. Thus, the expected national average premium for a so-called “silver” plan (remember the ACA’s requirement that “gold,” “silver” and “bronze” level plans should be available in the exchanges) should be actuarially equivalent to the average premium small employers would have paid in 2014.

Third: Reconcile wish list to premium target. IOM assumes that not all elements in the wish list developed in step one will be affordable given the premium target developed in step 2. That means the next step is to make choices.

When HHS makes these choices, IOM recommends that a “structured, public deliberation be conducted to set priorities within the concept of a budgetary constraint.” IOM sees 10—15 gatherings nationwide as serving an important public education function, allowing the public to better understand the cost tradeoffs that may need to be made. (These meetings would be advisory in nature and would supplement the traditional notice and comment approach used to solicit feedback from stakeholders and interest groups.)

Fourth: Communicate the contents of the EHB package via guidance or regulation. IOM urges HHS to be as specific in this guidance as possible.

For a comprehensive analysis of the ACA, and additional information on health reform and other developments in employee benefits, just click here.