Essential Health Benefits: What Could Their Elimination Mean?

At almost midnight on March 22, 2017, the House Rules Committee adjourned for the night. It had been expected to adopt House leadership amendments to the American Health Care Act and then pass the entire AHCA on to the House for a floor vote on March 23, the seventh anniversary of the adoption of the ACA.

Instead the Rules Committee ended the evening by adopting a "martial law," or same day rule, allowing it to amend and send to the floor the AHCA on March 23 (or anytime thereafter up until Monday, March 27) and the House to vote on the bill the same day as the Rules Committee vote.

Approval of the bill was delayed because the Republican leadership does not have the Republican votes to pass it and no Democratic support is expected. Reportedly, President Trump is negotiating with conservatives to get enough votes to pass it. Some conservatives are apparently insisting that all of the ACA's Title I insurance reforms be repealed before they will vote for the bill. These would include not just the provisions already amended or repealed in the AHCA—the individual and employer mandate (repealed immediately); the ACA's premium tax credits, cost-sharing reduction payments, and small business tax credits (repealed as of the end of 2019): the actuarial value metal level requirements (repealed as of the end of 2019), and the 3 to 1 age ratio rating requirement (amended to 5 to 1).

Additional provisions of Title I that could potentially be repealed include:

• The requirement that insurers sell coverage to all applicants,
• The guaranteed renewal requirement,
• The preexisting condition exclusion ban,
• The ban on health status underwriting,
• The single risk pool requirement for the individual and small group market
• Limits on the rating factors insurers may consider in the individual and small group market to age, tobacco use, geographic location, and family unit,
• The prohibition against annual and lifetime limits,
• The out-of-pocket limit requirement,
• The requirement that health plans provide an understandable and comparable summary of benefits and coverage,
• The medical loss ratio reporting and rebate requirements,
• The requirement that health plans provide access to pediatricians, obstetricians and gynecologists, and emergency care, and cover the routine costs of clinical trials,
• The requirement health insurers justify unreasonable rate increases,
• The requirement that insurers cover adult children up to age 26 on their parents policies,
• The requirement that insurers cover preventive services without cost sharing,
• The prohibition on rescissions except for fraud or material misrepresentation,
• Health plan quality rating and quality payment system requirements,
• Internal and external appeal requirements,
• The 90-day limit on group health plan waiting periods before eligible employees get coverage,
• The prohibition against discrimination against providers based on licensure status,
• The prohibition against discrimination on the basis of age, sex, national origin, race, or disability in federally funded health care programs,
• The exchanges or marketplaces; and
• The ACA's risk adjustment program.

This comprehensive a repeal of the ACA would have far-ranging consequences for our health care system that can scarcely be described, much less understood, in the hours that remain before a vote on the bill. Repeal of Title I would also expressly contradict President Trump's promises that he would preserve at least the pre-existing condition ban and the coverage of adult children requirement. The pre-existing condition ban could be carved out of the repeal, but without the guaranteed availability requirement and health status underwriting prohibition, a preexisting condition exclusion ban is meaningless—insurers would simply refuse to sell coverage to an applicant with a preexisting condition.

Finally, it would almost certainly be rejected by moderate Republicans in the Senate or be struck from the bill under the Senate's Byrd rule, which blocks consideration of matters under reconciliation procedures that do not more than incidentally affect the revenues or outlays of the United States government. The AHCA is proceeding through Congress using reconciliation procedures.

Essential Health Benefits In The Crosshairs

Most of the discussion on the night of the March 22 focused on the repeal of one particular provision, the Affordable Care Act's requirement that all health insurers in the individual and small group market cover a set of ten "essential health benefits." (EHBs) This requirement is, therefore, worthy of further consideration.

Prior to the ACA, each state had its own set of health benefit mandates, which varied considerably in their comprehensiveness. Health plans generally covered hospital and physician care, but many did not cover mental health or maternity care and some did not cover pharmaceuticals. Most covered oral or vision care only under a separate policy or as a rider.

In adopting the ACA, Congress concluded that a national standard needed to be laid down for benefit coverage in the individual and small group markets. This national standard would ensure that insurers would cover basic benefits, which would not vary significantly from state to state, for all insureds. The EHB requirement would ease comparison shopping among plans, and thus health plan competition, because insurers would all cover the same basic benefit package. The EHB requirement would also make possible the evaluation of the actuarial value of plans, facilitate risk adjustment among them, and avoid segmentation of risk pools.

The ACA defined the EHB as consisting of ten categories:

1. Ambulatory patient services,
2. Emergency services,
3. Hospitalization,
4. Maternity and newborn care,
5. Mental health and substance use disorder services, including behavioral health treatment,
6. Prescription drugs,
7. Rehabilitative and habilitative services and devices,
8. Laboratory services,
9. Preventive and wellness services and chronic disease management. and
10. Pediatric services, including oral and vision care.

The ACA charged the Secretary of HHS with defining the EHB, but required HHS to "ensure that the scope of the essential health benefits under paragraph (1) is equal to the scope of benefits provided under a typical employer plan, as determined by the Secretary." It further required the Department of Labor to survey employers to determine the scope of employer-sponsored coverage and the Chief Actuary of the Centers for Medicare and Medicaid Services to certify that the EHB package as defined by HHS met the scope of benefits requirement.

The ACA imposed additional requirements on the EHB package, including requirements that the package be balanced, nondiscriminatory, address the needs of diverse populations, and cover emergency services without prior authorization or additional out-of-network cost sharing. It required that HHS provide an opportunity for notice and comment before promulgating or revising the EHB package and periodically review the EHB, assessing whether it was meeting consumer needs and in line with changes in medical evidence or scientific advancement. States could impose additional benefit mandates, but would have to pay the cost of those additional benefits.

In response to the EHB requirement the Department of Labor conducted the required survey and HHS commissioned the Institute of Medicine (now the National Academy of Medicine) to do a report advising it on how to develop a national EHB package.

Considering the political pitfalls of trying to come up with a single, federal-government-imposed definition of EHB, however, HHS decided in its EHB rule to essentially delegate the job to the states and to private insurers. States were asked to choose among a private insurance plan from among the following options:

1. the largest plan by enrollment in any of the three largest small group insurance products in the state;
2. any of the largest three state employee health benefit plans;
3. any of the largest three Federal Employees Health Benefits Program plans; or
4. the largest insured non-Medicaid HMO in the state.

The chosen plan would become the state's "benchmark plan" and all non-grandfathered individual and small group plans in the state would have to provide substantially equal benefits, although they could substitute actuarially equivalent benefits within a benefit class. If a state failed to choose an option, the default benchmark plan would be the largest plan in the largest product in the state's small group market.

Special provisions were added for habilitative and pediatric oral and vision benefits, where there were gaps in existing plans, and for drug benefits, where greater precision was needed because of the complexity of formularies. These requirements have changed somewhat over time. Most states defaulted to or chose a small group plan, but a handful chose a state employee plan and one an HMO

The notion of EHB is woven throughout the ACA. The ACA's annual out-of-pocket limits requirement only applies to EHB, and without EHB would be essentially meaningless—insurers could again place annual limits on any covered benefit. Similarly, the prohibition on annual and lifetime limits only applies to EHB. Without an EHB requirement, health insurers could go back to selling "mini-med" coverage with absurdly low coverage limits and cut off insureds needing very high-cost care once they reached lifetime limits. The summary of benefits and coverage must disclose coverage, including cost sharing, for each of the EHB categories. Metal levels (which would be abolished by the AHCA) are based on actuarial value of EHB coverage. The ACA's premium tax credits and cost-sharing reduction payments only apply to EHB. Although the risk adjustment provisions of the ACA do not mention EHB, it is hard to imagine how risk adjustment would work across health insurers if each defined its own benefit package with no consistency.

The Potential Effects Of Eliminating EHB

The ACA's essential health benefits provisions have, however, remained controversial. The primary criticism of the EHB is that they have driven up the cost of coverage. Health plans could, opponents argue, be sold more cheaply if they did not have to cover all the EHB, particularly benefits like maternity, pediatric benefits, or habilitation services which many insurance consumers do not expect to need. Conservatives have also criticized the EHB as imposing too much federal control on benefits and not allowing plans sufficient flexibility in benefit design.

Elimination of the EHB requirement could certainly reduce coverage for certain benefits. Prior to the ACA, 62 percent of individual market plans lacked maternity coverage, 34 percent substance use disorder coverage, 18 percent mental health services, and 9 percent prescription drug coverage. Some insurers would likely return to eliminating some of these benefits. They could also sell cheaper plans if they did not have to cover the full scope of EHB benefits within each category. A plan could, for example, only cover certain categories of drugs or omit advanced radiology services.

In fact, however, the vast majority of the cost of health insurance is attributable to benefits that were nearly universal before the ACA and are likely to continue to be covered by reputable insurance policies. Removing maternity coverage from insurance coverage, for example, might lower premiums by $8 to $14 per month, but would dramatically raise the cost of coverage for women in child-bearing age, and possibly make maternity care essentially an out-of-pocket expense, costing potentially $30,000 to $50,000. Eliminating maternity coverage would likely cause women to skimp on prenatal care as well, increasing the social costs of caring for complex medical problems later. Removing coverage for substance abuse disorder treatment benefits during an opioid epidemic is a questionable decision.

If a minimum benefit standard no longer applied to health plans, benefits would likely also be used to segment the market, to cherry pick. Plans might still be prohibited from excluding preexisting conditions or engaging in health status underwriting, but could accomplish the same goal through defining the services they cover. Some insurers, for example, would likely choose to sell cheaper coverage that does not cover chemotherapy or AIDS drugs or autism services. Coverage that pays for such services would become correspondingly more costly and perhaps cease to be available at all. Risk adjustment among plans, which the ACA included as a backstop to discourage cherry picking, would be become difficult or impossible as apple-to-apple comparisons among plans will no longer be possible.

Eliminating a common benefit standard would also make comparison shopping among plans more difficult and correspondingly reduce competition among health plans based on price. Consumers would no longer be able to buy coverage, confident that plans cover a similar menu of services, but would have to review the entire policy, if it is available, to see what they are getting. Plans could once again compete by eliminating costly services rather than by providing lower premiums or better services. Eliminating the EHB would also likely cause states to enact their own mandates, causing insurance coverage to vary significantly from state to state.

Since the AHCA tax credits are fixed-dollar rather than variable based on plan premiums (except insofar as they cannot exceed plan premiums) it is not necessarily the case that the cost of coverage to the federal government will decrease by eliminating the EHB. It could even increase if there is greater take-up of tax credits for skimpier plans. It is also unclear how the CBO would score the change in terms of the number of the uninsured that would result. The CBO has defined insurance coverage in terms of ACA-compliant coverage, but has stated that if the ACA coverage provisions were repealed it would measure it in terms of comprehensive major medical coverage, which may not include the coverage that many people would obtain in the absence of an EHB requirement.

Although many Republicans in Congress have long wanted to get rid of the EHB requirement, there has been a concern that any move to do so would be blocked in the Senate under reconciliation act rules.

Insurer Antitrust Exemption

In other matters, the House passed on March 22, 2017 two bills affecting health insurance. The Competitive Health Insurance Reform Act of 2017 was passed with a bipartisan 416 to 7 vote. It repeals in part the McCarran-Ferguson Act antitrust exemption for insurers, retaining the exemption for certain collaborative activities. A CBO report on the bill projected that it would "have no significant net effect on the premiums that private insurers would charge for health or dental insurance and that any effect on federal revenue would be negligible." Eliminating or amending the McCarran-Ferguson act has been a long-term goal of many in Congress and this appears to be the opportune moment to do it.

Association Health Plans

The House also passed The Small Business Health Fairness Act by a much closer 217-175, largely party-line, vote. This bill would facilitate the sale of self-insured and insured association health plan products. Association health plans in the past have been criticized for increasing the risk of fraud, insolvencies, consumer abuses, and cherry picking. When a nearly identical bill passed the House in 2004, it was opposed by over 1,000 state government, business, labor, and consumer organizations, and physician and provider groups, including many small business organizations and chambers of commerce. Twenty consumer groups signed a letter to Congress opposing it this time. The National Association of Insurance Commissioners also opposed it. But the bill had the support of business groups like the National Retail Federation and moved forward in the House.

The bill is not part of the budget reconciliation process and will thus have to pass with 60 votes in the Senate if Democrats oppose it, as expected. It is unlikely, therefore, to become law.

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