The ACA has included a long series of bargains to achieve universal health care in the face of two forces: a multi-trillion dollar health care industry, and an implacable political opposition that refuses to bargain. Whatever the merits and blunders of the compromises taken, it should have come as no great surprise that the guidance released at the end of 2011 for the minimum benefit set (the “essential benefits”) was yet another compromise. It bowed to the existing authority of the states by allowing them leeway to decide the essential benefit package, despite the fact that the law itself seemed to intend a single national standard. There are limits, of course: ten categories of benefit must be covered (hospital, lab, maternity, dental, etc.) and the details on what is covered must be set by reference to one of four model plans:
• 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;
• The largest HMO plan offered in the state’s commercial market.
Predictably, immediate reactions were mostly negative. It was almost universally described as a “punt” by the administration, but a more accurate football metaphor is that the new guidance was a field goal. It’s certainly better than not scoring at all, and games can be decided by field goals. But it also means that your offense wasn’t good enough to close the deal on a touchdown. In that way, you can look at a field goal as one step closer to losing. For different reasons, that is exactly what some foes and supporters alike of the ACA will say about the new guidance.
But in this case it’s hard to see what there is to get worked up about. By pushing the details back to the states, HHS preserves more of the current structure of state-led regulation of the insurance markets than was expected under the ACA. The obvious intended effect is to allow states a range of essential benefits, and the most obvious reason to do that is to allow conservative states to have lower essential benefits than liberal states, so that each state gets closer to what the dominant powers within it want, reducing resistance to the law. There is also an election year bonus against an expected nominee Romney, whose main argument against the ACA at this point is that he wants states to have more control over how they create universal health care.
The variation produced by this guidance will also probably mean that wealthy (mostly blue) states won’t be sending as much federal tax money to poorer (mostly red) states. Redistribution of wealth through the ACA likely will be less than it would have been with a single national standard, and some of the poorer/redder states will choose to leave money on the table, as it were. States, such as New York, with coverage mandates for things like autism can still get them subsidized through the ACA by making them part of the essential benefit package.
Allowing states to set their own essential benefits will tend to have the largest effect in states with a lot of people in high deductible individual and small group policies, which are most common in the Midwest and West. Will that affect the number of people who are insured or the overall quality of coverage? A single national standard would have been settled on a mean between the rich-benefit states and the states that rely more heavily on thinner benefits. This is the key point: there would still have been a compromise if a single national standard were selected. For every individual who would have been a winner under a single scheme, there would probably also have been a loser, compared to the approach actually chosen. For similar reasons, it’s not clear that there is any need to significantly adjust estimates of how many people will be covered starting in 2014.
It must be acknowledged that the four avenues to setting the essential benefits are odd. Three of them would almost certainly lead to a high bar for the essential benefits than is the current average in most states (the most popular state employee plans, federal employee plans and commercial HMO plan). States that want a lower bar for essential benefits are unlikely to choose any of these. Only the option of turning to the three most popular plans in the small group market will allow a lower bar for essential benefits.
Tactically, to reduce resistance to the law’s implementation and to help with 2012 elections, there can be little question that this guidance was a smart move. States won’t appreciate having to scramble to set standards in the next 12 months or so, but the blowback avoided from a one-size-fits-all approach is considerable. It’s not easy for Republicans to successfully pivot 180 degrees from asserting that a federal approach is a gross over-reach into the sovereignty of the states, to claiming that letting the states choose benefits is a mistake because some states will select benefits that are too rich and other taxpayers will have to support them. Though that hasn’t stopped some from trying.
Will the new guidance lead to higher quality coverage or care compared to a national model, or will it lead to more people insured? Unlikely. But we should also be skeptical of any claim that it will make coverage or care worse than the national alternative would have been (the eventual compromise, not the ideal standard we can each imagine).
This guidance is a tactical move, a compromise calculated to increase the chances of success when the exchanges roll out. Instead of passing on 4th down, the Obama administration is going for the easy three points. This administration is clearly more comfortable playing a low risk game.
Jonathan Halvorson, PhD, has worked for the past seven years in managed care for a regional non-profit insurer. His views are entirely his own and do not represent those of his employer or other known individuals, living or dead.