When Congress enacted the Affordable Care Act (ACA), it mandated that a broad package of “essential health benefits” (EHBs) equivalent to that of a “typical employer plan” be offered by qualified health plans participating in newly created state-based insurance exchanges, as well as by new plans offered to individuals and small employers outside these exchanges. Congress directed the Department of Health and Human Services (DHHS) to flesh out the details. The DHHS, in turn, asked the Institute of Medicine (IOM) to recommend a process for defining and updating the EHB package — but notably, not to develop a specific list of benefits. In a report released on October 7, the IOM recommended that the initial EHB package be equivalent in scope to what could be purchased by the average premium that a small business would pay on behalf of an employee (see Key Recommendations of the IOM Committee on Defining and Revising an Essential Health Benefits Package for Qualified Health Plans).1 If the DHHS endorsed a more expansive package, the IOM's Committee on Defining and Revising an Essential Health Benefits Package for Qualified Health Plans cautioned in its report, many currently uninsured individuals and small businesses would find it unaffordable, which would undermine the overriding goal of the reform law — to make coverage both meaningful and nearly universal. To underscore its strong emphasis on affordability without elimination of appropriate coverage, the report said EHBs “should become more fully evidence-based, specific, and value-promoting over time,” and if additional services are added, “the package should be offset by savings” from the elimination of outmoded or unnecessary services and the making of prioritized choices among services supported by public dollars. Over time, under the ACA, an estimated 30 million uninsured individuals and employees of small businesses (fewer than 100 workers) with low-to-moderate incomes will become eligible for federally subsidized coverage through insurance exchanges or expansions of Medicaid programs. Most employees will remain insured through grandfathered or self-funded employer plans offered by large companies and some small ones, and these plans are exempt from the EHB mandate. The ACA stipulates that health plans must offer, to individuals and small businesses who seek coverage through an insurance exchange or outside of one, packages that “at least” include 10 broad benefit categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. The ACA allows states to require health plans to offer benefits beyond the defined set of EHBs, but states must assume the incremental costs for subsidies of any additional mandated benefits. To standardize benefits and establish a basis for calculating premium subsidies, the law creates four plan levels that are differentiated by their actuarial value — the percentage of covered expenses that a plan is expected to pay out, on average, as distinguished from what is paid out-of-pocket by the consumer. These levels are bronze (paying on average 60% of covered expenses), silver (70%), gold (80%), and platinum (90%). Individuals with incomes up to 400% of the federal poverty level (currently $88,200 for a family of four) will be eligible for tax credits scaled by income to help defray the cost of coverage. Individuals with incomes at or below 133% of the federal poverty level are eligible to enroll in Medicaid, which has little or no patient cost sharing. The IOM report identifies key challenges that the DHHS will face as it strives to equate the ACA-defined EHBs with the typical small-business package. For one, the conductors of an ACA-mandated Labor Department survey of documents from 3200 employer-sponsored insurance plans found it difficult to describe with much precision the benefits of a “typical” employer package.2 In addition, some benefits mandated by the ACA — such as habilitative services, wellness programs, and pediatric oral and vision care — are generally not included in standard small-employer or even large-group insurance contracts. The report notes that for employers, establishing a budget creates one way to explicitly consider benefit-package tradeoffs when resources are limited. The committee decided to peg its budgeting target to the estimated average premium for a “silver” package — the second-lowest-priced plan available through an exchange and the level to which the ACA's premium subsidies are linked. The report suggests that the DHHS's selection of benefits be guided by an estimate such as that prepared by the Congressional Budget Office (CBO)3 and converted to 2014 dollars by the IOM committee — $6,933 for an individual policy (see table
Estimated Health Insurance Premiums for Individual and Family Policies without the Affordable Care Act (ACA) and after Its Implementation.) — or a RAND estimate of $5,474 for a silver plan when individual and small-group risk pools are combined.4 To build on those estimates, the IOM recommended that the DHHS seek actuarial advice on the costs of all elements of the EHB plan, including benefit-design features such as the degree of medical management, provider payment rates, and patient cost sharing. Actual premiums for plans would vary, as they do now, with the geographic area, population enrolled, and other factors. As part of its assigned task, the IOM committee was asked to evaluate definitions of “medical necessity review” that are found in private insurance contracts. The committee concluded that such processes and other medical management techniques (e.g., prior authorization) “with appropriate checks and balances, are necessary to ensure that the package of EHB benefits can be delivered at the most affordable cost.” The ACA requires the establishment of an independent external review of appealed medical necessity cases. The committee decided not to recommend a single national definition of medical necessity but added: “The criteria used for medically necessary services or services that conform to medical necessity are medical services that are (1) clinically appropriate for the individual patient, (2) based on the best scientific evidence, taking into account the available hierarchy of medical evidence, and (3) likely to produce incremental health benefits relative to the next best alternative that justify any added cost.” These criteria are consistent with best practices and supported by legal precedent.
The IOM report acknowledges that “the determination of the EHB is a politically and socially charged endeavor.” Recognizing the controversy the EHBs could provoke, the committee recommends that the DHHS create a “structured interactive process” to advise the department on reconciling “the tensions between comprehensiveness and affordability.” From its beginning, the panel agreed unanimously that if the long-standing problem of rising health care costs is not addressed more aggressively, the ACA's goals of reducing the uninsured population (49.9 million people, or 16.3% of the population, in 2010, according to the U.S. Census Bureau) and offering meaningful benefits could be undermined.
The report said the cost trend will not be moderated only by the definition of EHBs and added: “The committee considered whether complementary Medicare-only or federal-only approaches to reducing rising health costs would be sufficient and concluded they would not be. An all stakeholder strategy is required across the public and private sectors,” and the ACA-created independent payment advisory board, even if it survives strong opposition to its creation, will not include formal engagement of the private sector. By expressing its concern over health care costs whose annual increases outstrip the growth of the economy, the committee has issued a wake-up call for policymakers, clarifying how this spending pattern squeezes out other important competing needs, particularly in a no-growth economy. However, such previous warnings, as often as they have been issued, have largely fallen on deaf ears.
KEY RECOMMENDATIONS OF THE IOM COMMITTEE ON DEFINING AND REVISING AN ESSENTIAL HEALTH BENEFITS PACKAGE FOR QUALIFIED HEALTH PLANS.*
1. The secretary of health and human services should establish an essential health benefits (EHB) package including the 10 categories contained in the Affordable Care Act and as guided by a national average premium target. Once developed, the 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. A public deliberative process should be used to make adjustments to the initial EHB package.
2. By January 2013, the 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. The secretary should implement this framework and coordinate federal efforts to produce and make the data accessible for public use.
3. Beginning in 2015, the secretary should update the EHB package to make it more fully evidence-based, specific, and value-promoting — explicitly incorporating costs. A public deliberative process should be used to inform choices about what to include in or exclude from the updated package.
4. The secretary should permit states administering their own exchanges to adopt 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.
5. The secretary should 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.
6. To ensure that the EHB-defined packages remain affordable and sustainable, the secretary should develop a strategy, in collaboration with others, for aligning the growth rate of health care spending in all sectors with that of the economy.
* Summarized from the Institute of Medicine Committee report.1 Disclosure forms provided by the author are available with the full text of this article at NEJM.org. This article (10.1056/NEJMp1109982) was published on October 7, 2011, at NEJM.org.
SOURCE INFORMATION
Mr. Iglehart is a national correspondent for the Journal.
