Federal Government Prepares to Define Essential Benefits

Published November 21, 2012

President Obama’s health care law requires that the administration define essential health benefits for the nation, a task which federal and state officials have found more challenging than expected.

As of October 2012, only eleven states have settled on essential health care benefits packages or are close to doing so, while twenty others are still considering the issue. The plans are widely divergent on some coverage requirements. In California, legislators maintain acupuncture benefits are essential to every plan. In Michigan, officials want to include chiropractic services. In Oregon, they’ve decided neither service should be included.

The decisions could have a big impact on health insurance premiums. If state insurance plans cover too much, premiums will necessarily rise and become prohibitively expensive. But although the Obama administration empowered each state to devise its own list of essential health care benefits, it left the final say to the U.S. Secretary of Health and Human Services (HHS)—meaning there is only a certain amount of flexibility to cut back on costlier mandates.

Feds Run the Show

Jonathan Ingram, director of health policy and pension reform studies for the Illinois Policy Institute, notes although states have been asked to make “suggestions,” HHS retains the ultimate authority to set the benefits.

“Ultimately, these rules impose even more onerous benefit mandates on consumers and drive up the cost of insurance. We should be giving people the freedom to choose and customize health plans that meet their own needs, not the needs of bureaucrats in Washington, DC,” said Ingram.

Ingram notes states must also include coverage in 10 broad categories contained in Obama’s law, including mandatory minimum coverage for doctor visits, maternity care, and prescription drugs. They must also model their plans on existing health insurance policies, using a small-group plan or the insurance package of state employees as a template.

Even so, federal bureaucrats are free to change or reject altogether anything the states suggest.

Power of Lobbyists

Devon Herrick, a senior fellow and health economist with the National Center for Policy Analysis, says lobbyists, not patient needs, will drive which benefits are deemed essential. He notes many states with already heavier mandates for required coverage will increase them further in response to active lobbying efforts in the statehouse from “rent-seekers”.

“Once the Affordable Care Act is up and running, lobbyists and representatives for specific diseases and conditions will descend on states capitols and demand the specific diseases and conditions for which they advocate must be covered under the so-called ‘essential benefit package’,” said Herrick.