Essential Health Benefits: Balancing Costs, Coverage, And Necessity

The much anticipated Institute of Medicine Report on essential health benefits (EHB) was released last week with a series of recommendations that answered some questions and raised many more. The report offers a very important opportunity for researchers, policymakers, providers and patients to fill in some of the white space between the recommendations.

Background on EHB in the Affordable Care Act and some Legislative History

The Affordable Care Act (ACA) tasked the IOM to make recommendations on the methods for determining and updating the essential health benefits that must be offered by qualified health plans seeking to participate in exchanges as defined in section 1301 of the statute. The ACA identified ten categories of items and services that must be included in a package of benefits:

  • Ambulatory patient services
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

The Affordable Care Act did not have a conference committee report, which is the product of the House and Senate working to resolve differences between the two chambers’ versions and also helps to highlight legislative intent. So the long history of the decisions behind the language and legislative intent is not as apparent.  Briefly, Congress looked at many design models and previous bills, such as HR 3600 — one of the health reform bills put forward during the Clinton administration — which contained 61 pages of details on benefits. This approach was was felt to be too detailed and prescriptive.  Staff from Senator Kennedy’s Health, Education, Labor and Pensions Committtee used the Massachusetts language on exchange benefits and its promulgated regulations and then made important additions such as habilitative services (educational or long term services, often associated with long terms disabilities or conditions such as autism).

Some Congressional members wanted to model the EHB after employer coverage to reflect benefits that were meaningful and looked like other plans familiar to most Americans. Categories listed in ACA were modeled in most part on the Federal Employee Health Benefit Plan (FEHBP), except for the pediatric oral/vision care services, which were added later in the process and were modeled in part to reflect other plans with wrap-around services such as Medicaid/CHIP. Finally, there was an explicit intent to allow for innovation and change – setting a floor, not a ceiling for benefits.

Summary of IOM Findings

The IOM recommended that HHS develop an EHB package by May 2012. The essentials of the recommendations, with some important additional points of information, are as follows:

1. The EHB package should be adjusted so that the expected national average premium for a “silver” (second-lowest-price) plan is actuarially equivalent to the average premium small employers would have paid in 2014 for a typical plan.

For reference, in 2010, the average premium for small group health care coverage was $426 per month, or $5,107 annually, for single coverage, and $1,117 per month, or $13,409 annually, for family coverage,according to America’s Health Insurance Plans. The same study found that premiums fell as employer size increased. Firms with ten or fewer employees had average monthly premiums of $446 for single coverage. Firms with 11 to 25 employees paid an average of $419 per month for single coverage. Employers with 26 to 50 employees paid the lowest, $406 per month for single coverage.

2. The HHS Secretary should establish a framework for monitoring EHB implementation and updating that accounts for changes in provider payment rates, financial incentives, practice organizations, and other relevant matters. (IOM recommends that this be done by January 2013)

Such a framework does not exist and can have a great deal of value beyond the estimated 60 million who would be affected by the EHB (plans in the exchanges, small/ind market, Medicaid benchmark and benchmark equivalent plans, state basic health programs). This recommendation could help to truly develop a learning health care organization through the EHB.

3. The Secretary should update the EHB package to make it more fully evidence-based, specific, and value-promoting — explicitly incorporating costs and a public process to gain input on the updates.  (IOM recommends that this begin in January 2016)

It is worth noting that Medicare is not supposed to consider cost when making coverage decisions. While updating the EHB package may not be the equivalent of the Medicare coverage determination process, it poses an interesting set of challenges on how best to balance cost and the need to be comprehensive.

4. State should have flexibility in adopting variants of the federal EHB package, provided that modifications are consistent with the federal package, not significantly more or less generous, and are subject to public input.

Prior to the release of the IOM report, there was concern about how an EHB package would interact with the numerous state mandate for health care coverage.  According to the Council on Affordable Health Insurance, there are states with as many as 69 mandates for coverage (Rhode Island), so the language around state flexibility alleviates some of the concern regarding mandates as well as offering an opportunity for state-level advocates to augment the EHB as necessary.

5. Establish a National Benefits Advisory Council, with members appointed through a nonpartisan process, which should make recommendations annually stemming from its oversight of the EHB package.

This is very much in line with what the Massachusetts Health Connector (exchange program) has done to establish a process to update their benefit package; one of the hallmarks of the Connector’s success has been its transparent, multistakeholder efforts in obtaining feedback. For example, in developing “minimum credible coverage” standards, they actively engaged patient advocates, providers and other experts to shape the recommendations that were adopted by the Connector Board.

Issues for Further Consideration

The essential health benefits statue is very unique; details were sparse in legislative language for reasons referenced above. This is in contrast to the very specific coverage terms in Medicare.  There have already been a number of concerned voices suggesting that the IOM recommendations prioritize cost to the detriment of benefits; this only presages the challenges the administration will have moving forward.  On one hand, the EHB should be as inclusive as possible with as much emphasis on quality as statutory authority will allow.  On the other hand, the benefits package must be structured such that a sufficient number of carriers express interest in participating in the exchange, thus achieving affordability.

Balancing cost and coverage is not the only issue.  The EHB statutory language also raises the issue of how to balance nondiscrimination and affordability.  For example, a limit on a particular treatment for all persons might be cost-effective and clinically effective, but it could be very limiting for a subpopulation and thus potentially discriminatory.  How HHS will set up a process or framework for deliberation around discrimination and medical necessity will be just as critical as the actual EHB itself.  The IOM recommended that HHS work with states to standardize and collect information to ascertain compliance, as well as any variations in the definition of medical necessity, network limitations and prior authorizations.  The committee extended this data collection effort to include race/ethnicity/age/sex when possible, so that potential discrimination can be identified.

Finally, the experiences in Massachusetts and Utah have illustrated that even once an EHB is determined, there are real information barriers which make it difficult for individuals and small businesses to understand how to choose products within the exchange.  While the burden of bridging this information divide will largely fall on states, the federal government should consider how to share best practices as the states each deal with these challenges and identify solutions.

Opportunities for PolicyMakers, Researchers, Providers and Patients

A key theme throughout the IOM report is the emphasis on evidence and value.  Despite the lack of specifics around the various benefit categories (something the IOM was never charged with doing), the opportunity to innovate and align the recommendations for an EHB with various delivery system reforms, research efforts and policies has never been more timely.

Researchers in health care will need to work on the development of methods for comparative effectiveness research to guide coverage policy and determine how best to incorporate cost in such research. Cost-effectiveness research has not been a high priority for a variety of practical and political reasons, but the IOM’s recommendations put this research in a new light. Additionally, rapid cycle evaluation will be critical in understanding how an EHB may need to be modified at the federal and state levels in a timely manner.

Health care leaders and providers advancing payment reforms such as bundled payments and shared savings, which have the potential to help decease cost, could prove to be “accelerators” for dealing with the tensions between cost and benefits, placing more emphasis on the Center on Medicare and Medicaid Innovation’s pilots and their evaluation efforts.  For example, if primary care coordination models can help decrease total care cost in Medicare as well as the large and small group markets, consumers can benefit from improved coverage for clinically effective services. The timeline for these efforts is years, not months, but we will need to understand how to identify short-term successes and translate such information to a national benefit advisory council.

State-based exchanges themselves can serve as laboratories for initiatives such as value-based benefit design.  They can incorporate aspects of increased consumer engagement such as shared decision-making, which can allow conversations around clinical efficacy and affordability to achieve greater prevalence in health care.

Patients and their families will have the final word in terms of whether benefits are sufficient, and it will be imperative to understand the infrastructure support that is required so that consumers can participate in an equitable way.  Consumers need access to outcomes research, as well as clear transparency in their ability to have meaningful input concerning the updates to an EHB.

The IOM report may have left readers with more questions rather than answers, but perhaps that will allow for various stakeholders to take a more active role in helping shape the trajectory on a path towards affordable and equitable health care coverage.

Kavita Patel is a Fellow and Managing Director of Delivery System Reform and Clinical Transformation at the Engelberg Center for Health Care Reform at the Brookings Institution. She was previously Director of the Health Policy Program at the New America Foundation, a nonpartisan public policy institute in Washington, D.C. Dr. Patel is a board-certified physician dedicated to bringing stories from the clinical world to the heart of policymaking.

This post first appeared at Health Affairs Blog on 10/12/2011. Copyright ©2010Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.

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