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Primer:'Essential'Health'Benefits'(EHB)'
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Michael(Ramlet(and(Nicole(Fisher(l(February(28,(2012(
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The'Invention'of'the'Pre8Rule'Bulletin'
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The0 Affordable0 Care0 Act0 (ACA)0 tasked0 the0 Department0
of0 Health0 and0 Human0 Services0 (HHS)0 with0 creating0 a0
comprehensive0 package0 of0 health0 benefits,0 known0 as0
“essential0health0benefits”0(EHB).00Beginning0in02014,0all0
health0 plans0 are0 required0 to0 begin0 offering0 the0 EHB0
package0 to0 beneficiaries0 in0 the0 individual0 and0 small0
group0markets.0
0
On0 December0 16,0 2011,0 HHS0 took0 its0 first0 formal0 step0
toward0 offering0 official0 guidance0 on0 the0 EHB0 issue.00
Traditionally,0 HHS0 issues0 a0 notice0 of0 proposed0
rulemaking0 (NPRM),0 but0 in0 this0 case0 HHS0 instead0
released0 a0 first0 of0 its0 kind,0 preRrule0 “bulletin”0 followed0
by0 a0 Frequently0 Asked0 Questions0 memo.0 0 The0 bulletin0
outlined0 how0 the0 Secretary0 intends0 to0 approach0 the0
formal0 EHB0 rulemaking0 process,0 and0 the0 FAQ0 memo0
clarified0only0a0few0questions.000
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Instead0of0setting0a0single0uniform0standard0for0national0
health0 benefits,0 the0 Obama0 Administration0 has0
proposed0 using0 a0 stateRbased0 benchmark0 plan0
approach,0 which0 eventually0 could0 affect0 nearly0 700
million0 Americans.0 0 The0 following0 primer0 explains0 how0
the0proposed0benchmark0approach0is0supposed0to0work0
and0 the0 red0 flags0 that0 have0 been0 raised0 since0 the0
bulletin’s0release.'
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State8Based'EHB'Benchmarks'
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The0 essential0 health0 benefits0 bulletin0 indicates0 that0
states0 will0 be0 allowed0 to0 select0 an0 existing0 health0 plan0
to0serve0as0a0benchmark0for0the0set0of0services0offered0
by0 a0 “typical0 employer0 plan.”0 0 The0 preRrule0 bulletin0
includes0a0set0of0four0plan0options0for0states0to0choose0
from0to0determine0a0benchmark:0
EHB'Pre8Rule'Bulletin'Raises'Red'Flags'
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Red$Flag$#1:$HHS$Skipped$the$Cost$Impact$Analysis$
By0issuing0a0bulletin0rather0than0a0proposed0rule,0the0
Obama0Administration0has0sidestepped0the0
requirement0to0publish0a0cost0benefit0analysis0
estimating0the0impact0that0the0essential0health0
benefit0mandates0will0have0on0private0health0
insurance0premiums,0and0ultimately,0the0federal0
budget0as0a0result0of0the0health0insurance0exchange0
subsidies.0
0
Red$Flag$#2:$HHS$Avoided$Listing$Unfunded$
Mandates$
The0bulletin0approach0has0also0allowed0the0Obama0
Administration0to0avoid0publishing0a0list0of0unfunded0
mandates0on0states0and0the0private0sector.0
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Red$Flag$#3:$HHS$Ignored$PPACA$Provisions$
The0proposed0approach0not0only0sets0an0uneven0
playing0field0for0purposes0of0benefits0for0consumers,0it0
ignores0the0expressed0intent0of0Congress0for0states0to0
offset0the0cost0of0state0mandates0exceeding0the0EHB0
package.0
0
Red$Flag$#4:$HHS$Failed$to$Ensure$Plan$Flexibility$
The0bulletin0fails0to0make0certain0that0health0insurers0
will0be0able0to0continue0offering0new0and0innovative0
plan0designs,0including0highRdeductible0health0savings0
account0plans,0tiered0benefits,0and0network0design0
tools0that0are0critical0to0maintaining0plan0affordability.0
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Red$Flag$#5:$HHS$Created$Costly$Uncertainty$
The0invention0of0the0preRrule0bulletin0has0created0
uncertainty0among0states0and0the0private0sector0as0it0
remains0unknown0whether0the0Obama0Administration0
will0undertake0full0rulemaking0relative0to0the0creation0
of0the0essential0health0benefits0package.0
0
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For(more(information,(please(contact(the(American(Action(Forum’s(Director(of(Healthcare(Policy,(Michael(Ramlet,(at(
[email protected]
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One0of0the0three0largest0small0group0plans0in0the0state0by0enrollment;0
One0of0the0three0largest0state0employee0health0plans0by0enrollment;0
One0of0the0three0largest0federal0employee0health0plans0by0enrollment;0
The0largest0HMO0plan0offered0in0the0state’s0commercial0market0by0enrollment.0
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If0a0state0chooses0not0to0select0a0benchmark,0HHS0will0select0the0small0group0plan0with0the0largest0enrollment0in0the0
state0as0a0default0benchmark.0
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Under0the0Affordable0Care0Act,0health0plans0are0required0to0offer0the0benchmarked0essential0health0benefits,0which0
must0include0coverage0of0services0and0items0in0all0100statutory0categories:00
1. Ambulatory0Patient0Services;0
2. Emergency0Services;0
3. Hospitalization;0
4. Maternity0and0Newborn0Care;0
5. Mental0Health0and0Substance0Use0Disorder0Services;0
6. Prescription0Drugs;0
7. Rehabilitative0and0Habilitative0Services0and0Devices;0
8. Laboratory0Services;0
9. Preventative0and0Wellness0Services0and0Chronic0Disease0Management;0and0
10. 0Pediatric0Services.0
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If0 a0 state0 selects0 a0 benchmark0 plan0 that0 does0 not0 cover0 all0 100 categories0 of0 care,0 the0 state0 must0 supplement0 the0
benchmark0by0reference0to0another0plan0that0covers0that0service.00HHS0has0indicated0that0in0principle0health0plans0
could0 modify0 coverage0 within0 a0 benefit0 category0 so0 long0 as0 the0 plan0 could0 substitute0 equivalent0 coverage0 of0
services.00Additional0regulatory0details0related0to0the0final0costRsharing0rules0are0necessary0to0determine0the0degree0
to0which0health0plans0will0be0modifying0their0coverage0within0each0benefit0category.0
0
As0a0transition0in020140and02015,0the0bulletin0indicates0that0some0of0the0benchmark0plan0options0will0include0health0
plans0that0are0subject0to0state0mandates.0Those0mandates0would0be0included0in0a0state’s0essential0health0benefit0
package,0if0the0state0selected0one0of0the0largest0small0group0plans0as0its0benchmark.0
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Red'Flags'Stemming'from'the'Pre8Rule'“Bulletin”0
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The0issuance0of0a0preRrule0bulletin0is0unprecedented0and0has0led0to0many0concerns0regarding0the0implementation0of0
the0Affordable0Care0Act’s0essential0health0benefits0package.00Limited0due0diligence,0ignoring0the0recommendations0
from0the0Institute0of0Medicine0(IOM),0an0uncertain0regulatory0process,0and0an0unknown0timetable0have0together0
raised0red0flags0among0industry0stakeholders0and0congressional0lawmakers.0
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Limited(Due(Diligence:0
• Direct0 Cost0 Impact:0 By0 issuing0 a0 bulletin0 rather0 than0 a0 proposed0 rule,0 the0 Obama0 Administration0 has0
sidestepped0 the0 requirement0 to0 publish0 a0 cost0 benefit0 analysis0 estimating0 the0 impact0 that0 the0 essential0
health0 benefit0 mandates0 will0 have0 on0 private0 health0 insurance0 premiums,0 and0 ultimately,0 the0 federal0
budget0 as0 a0 result0 of0 the0 health0 insurance0 exchange0 subsidies.0 0 For0 example,0 the0 bulletin0 provides0 a00
2014R20150 transitional0 period0 in0 which0 states0 are0 not0 financially0 responsible0 for0 the0 inclusion0 of0 state0
www.OperationHealthcareChoice.org'
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mandates0 in0 the0 essential0 health0 benefits0 benchmark.0 0 This0 is0 expected0 to0 lead0 to0 higher0 premiums0 for0
beneficiaries0 and0 more0 expensive0 subsidies0 for0 the0 federal0 government.0 Even0 if0 HHS0 undertakes0 formal0
rulemaking,0the0bulletin0process0cannot0be0used0as0the0basis0for0public0input,0thus0sidestepping0the0formal0
NPRM0process0and0justifying0an0interim0final0rule.0
Compliance0 Cost0 Impact:0 The0 bulletin0 approach0 has0 also0 allowed0 the0 Obama0 Administration0 to0 avoid0
publishing0a0list0of0unfunded0mandates0on0states0and0the0private0sector.00In02011,0the0Affordable0Care0Act’s0
regulation0 forced0 over0 34.10 million0 new0 paperwork0 hours0 onto0 states0 and0 the0 private0 sector0 at0 a0 cost0 of0
over0 $11.30 billion.0 Accurately0 accounting0 for0 the0 unfunded0 mandates0 stemming0 from0 essential0 health0
benefits0 regulations0 would0 force0 millions0 of0 new0 paperwork0 hours0 onto0 already0 struggling0 states,0
businesses0and0taxpayers.0
Cost0of0Alternatives:(By0issuing0a0bulletin0rather0than0a0proposed0rule,0the0Obama0Administration0avoided0
publishing0 a0 list0 of0 alternative0 options,0 which0 may0 have0 identified0 a0 more0 efficient0 path0 forward0 for0
implementing0the0essential0health0benefits0regulations.0
Ignoring0 express0 provisions0 of0 PPACA:0 The0 statute0 expressly0 requires0 states0 to0 offset0 the0 cost0 of0 state0
mandates0 above0 the0 EHB0 package.0 0 The0 proposed0 approach0 not0 only0 sets0 an0 uneven0 playing0 field0 for0
purposes0of0benefits0for0consumers,0it0ignores0the0recommendations0of0the0IOM0and0the0expressed0intent0
of0 congress0 to0 create0 a0 level0 playing0 field0 among0 states.0 0 Congress0 intended0 for0 states0 to0 reimburse0 the0
federal0government0for0mandates0that0go0above0and0beyond0the0EHB0package.0
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Uncertain(Regulatory(Process(
• Legal0 Standing:0 The0 bulletin0 does0 not0 have0 the0 full0 force0 of0 law0 and0 cannot,0 therefore,0 be0 considered0 an0
indication0of0what0the0proposed0or0final0rule0will0require.00As0a0result,0states0still0have0many0unanswered0
questions0 and0 no0 more0 certainty0 than0 they0 had0 before0 the0 bulletin0 was0 released.0 0 Such0 uncertainty0 does0
little,0if0anything,0to0allow0states0to0plan0for0the0burdensome0regulations0that0HHS0will0publish0on0this0topic0
prior0to02014.00It0is0unreasonable0to0expect0states0to0be0ready0to0implement0such0dramatic0changes0by02014,0
and0even0more0unreasonable0to0expect0states0to0decide0on0benchmarks0by0the03rd0quarter0of02012.0
• Benchmark0 Consistency0 over0 Time:0 0 The0 bulletin0 does0 not0 indicate0 whether0 states0 will0 be0 required0 to0
maintain0the0same0consistent0benchmark0plan0during0the02014R20150transition0or0what0should0be0expected0
in0 20160 when0 HHS0 will0 again0 reevaluate0 standards.0 0 Maintaining0 a0 consistent0 benchmark0 is0 necessary0 to0
allow0adequate0time0for0marketRwide0implementation0and0the0evaluation0of0both0the0benchmark0plan0and0
other0insurance0market0provisions.0
• Benchmark0 Consistency0 across0 Insurance0 Markets:0 0 The0 bulletin0 does0 not0 indicate0 whether0 a0 benchmark0
plan0selected0in0the0state0must0be0the0same0plan0for0both0the0individual0and0small0group0markets.00Allowing0
different0benchmark0plans0could0promote0adverse0selection0by0encouraging0employers0to0cease0coverage,0
sending0consumers0to0the0individual0market.0
• Flexibility0in0Benefit0Plan0and0Network0Design:00The0bulletin0fails0to0make0certain0that0health0insurers0will0be0
able0to0continue0offering0new0and0innovative0plan0designs,0including0highRdeductible0health0savings0account0
plans,0tiered0benefits,0and0network0design0tools0that0are0critical0to0maintaining0plan0affordability.0
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Unknown(Timetable(
• Notice0 of0 Proposed0 Final0 Rulemaking0 (NPRM)0 vs0 Interim0 Final0 Rule0 (IFR):0 0 The0 invention0 of0 the0 preRrule0
bulletin0has0created0considerable0consternation0among0states0and0the0private0sector0as0it0remains0unknown0
whether0the0Obama0Administration0will0undertake0full0rulemaking0relative0to0the0creation0of0the0essential0
health0 benefits0 package.0 0 Many0 stakeholders0 still0 fear0 that0 HHS0 will0 bypass0 the0 notice0 of0 proposed0 final0
rulemaking0 and0 release0 an0 interim0 final0 rule.0 0 This0 threat0 worries0 stakeholders0 because0 it0 limits0 the0
www.OperationHealthcareChoice.org'
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opportunity0for0important0regulatory0feedback0through0the0formal0comment0period0and0just0as0important,0
an0IFR0process0bypasses0the0needed0cost0analysis.00
Finalized0State0Determinations0for0Benchmark0Plans:00The0bulletin0does0not0include0a0deadline0for0notice0of0
final0 benchmark0 determinations0 by0 states.0 0 The0 unreasonable0 timetable0 for0 finalizing0 benchmark0
determinations,0the03rd0quarter0of02012,0threatens0the0launch0of0stateRbased0insurance0exchanges0in02014.00
The0 insurance0 industry0 contends0 that0 it0 needs0 final0 state0 benchmark0 determinations0 by0 June0 30,0 20120 in0
order0to0provide0sufficient0time0to0complete0product0and0benefit0designs0that0can0move0through0the0state0
regulatory0review0process0and0be0listed0on0the0insurance0exchanges0by02014.0
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The'American'Action'Forum0is0a0forwardRlooking0policy0institute.0The0Forum0produces0realRtime,0
factRbased,0innovative0policy0analysis0and0solutions0for0policy0makers0and0the0public0alike.0Our0
mission0is0to0promote0commonRsense,0innovative0and0solutionsRbased0policies0that0will0reform0
government,0challenge0outdated0assumptions,0and0create0a0smaller,0smarter0government.0
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Operation'Healthcare'Choice0is0the0Forum’s0public0policy0center0focused0on0promoting0highRvalue0
healthcare0and0higher0quality0health0insurance0that0expands0consumer0choice.0Operation0
Healthcare0Choice0experts0conduct0research,0offer0commentary,0and0develop0policies0aimed0at0
eliminating0healthcare’s0burden0on0the0economy.0
www.OperationHealthcareChoice.org'
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